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Unformatted text preview: 5/5/10 1:40 AM Blackboard Learn Page 1 of 5 https://blackboard.usc.edu/webapps/portal/frameset.jsp?tab_tab_gro…oard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_37604_1%26url%3D The Community ProductionPossibilities Curve The productionpossibilities curves (PPC’s) of two individuals, A and B, are shown in figures 1.1 and 1.2. A has a comparative advantage at producing y, and B is best at x. As shown, A is producing 3x and 10y, while B is producing 12x and 4y. Note that the PPC’s extend beyond the axes, meaning that negative production is possible. At point R, for example, A is producing –4 units of x and 17 units of y. The interpretation of this is that A uses x as an input in producing y. In the case shown, A would have to be buying 4 units of x from someone, and using them to produce y. If he had been unable to buy x from anyone, the most y he could have produced would have been 15. The four purchased units of x enable him to produce 17y—two more than he could have produced without being able to buy x. 5/5/10 1:40 AM Blackboard Learn Page 2 of 5 https://blackboard.usc.edu/webapps/portal/frameset.jsp?tab_tab_gro…oard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_37604_1%26url%3D Figure 1.3 shows the construction of the community PPC, or CPPC. B’s curve is rotated 180 degrees and placed tangent to A’s curve,Figure 1....
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 Spring '07
 Cheng
 Economics, Comparative Advantage, CPPC

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