Production Possibilities Curves. The production possibilities frontier is a graph that shows the combinations of output that the economy can possibly.

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Presentation transcript:

Production Possibilities Curves

The production possibilities frontier is a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology. Its purpose is to simplify and help explain our economy.

Figure 2 The Production Possibilities Frontier Copyright©2003 Southwestern/Thomson Learning Production possibilities frontier A B C Quantity of Cars Produced 2, , ,000 3,000 1,000 Quantity of Computers Produced D

Our Model: The Production Possibilities Frontier Concepts Illustrated by the Production Possibilities Frontier Efficiency Tradeoffs Opportunity Cost Economic Growth

Figure 3 A Shift in the Production Possibilities Frontier Copyright © 2004 South-Western E Quantity of Cars Produced 2, , ,000 3,000 1,000 Quantity of Computers Produced A

Table 1 The Production Opportunities of the Farmer and Rancher Copyright © 2004 South-Western

Figure 1 The Production Possibilities Curve Potatoes (ounces) A 0 Meat (ounces) (a) The Farmer’s Production Possibilities Frontier If there is no trade, the farmer chooses this production and consumption. Copyright©2003 Southwestern/Thomson Learning

Figure 1 The Production Possibilities Curve Copyright©2003 Southwestern/Thomson Learning Potatoes (ounces) B 0 Meat (ounces) (b) The Rancher’s Production Possibilities Frontier If there is no trade, the rancher chooses this production and consumption.