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Unformatted text preview: 1-11PRODUCTION POSSIBILITIESCURVESPurpose: To use the production possibilities curve (PPC) model to understand scarcity andconstrained choice. To emphasize the distinction between movements along a PPC and shifts thePPC. To show the concept of opportunity cost using the PPC model.Computer file: ppc98.xlsInstructions and background information:Open the Excel file ppc98.xls, and choose whether you want to do the problems aspractice, or whether you want to do the problems to hand in for credit.A production possibilities curve (PPC) shows the maximum amount of one good that canbe produced given a production level for some other good, and given the total amounts of inputsavailable for production of both goods, and given the technology of production. The PPC showsthe limits on outputs of goods because society does not have unlimited resources. And it showsthe trade-off society must bear if more of a good is to be produced.Attainablelevels of output are those that can be produced with the current resources(inputs) and technology. Unattainablelevels of output cannot be produced with currentresources and technological know-how. Efficientlevels of output occur when the maximumoutput of one good is being produced, given the output level of the other. Efficient output levelsmust lie on the production possibilities curve. Output levels are inefficientif it’s possible toproduce more of everything using only your current resources and know-how.The production possibilities curve for these problems shows the quantities of pizza andpasta that can be produced given the amount of labor input available for production, and given thecurrent technology for producing the goods. (There may be other inputs than labor, such aswheat or tomatoes, but they are being held constant for the problems you will have to work outhere.)Examine carefully the parts of the screen that show data. There are baseline and currentvalues for all of the variables: labor, pizza and pasta output, and technical efficiency. You will beable to change the current values (within limits), and the graph will show the results of yourchoices....
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This note was uploaded on 04/03/2011 for the course ECO 2252 taught by Professor Edward during the Spring '08 term at Troy.

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