Ch 2 PPF - Chapter 2 Production Possibilities The...

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Chapter 2 Production Possibilities
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The Production Possibilities Frontier The production possibilities frontier , PPF , is a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available roduction technology. production technology. It shows the best an economy can do if it uses all its resources efficiently, given the current technology. NOTE: the PPF is often called a production possibilities boundary, PPB.
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Example: Macland Consider the economy of Macland. It produces only 2 goods: computers and cars. acland’s technology is given (it is what it is). Macland’s technology is given (it is what it is). Its resources are fixed. The following table shows combinations of computers and cars Macland can produce if it uses all its resources, given the current technology:
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COMPUTERS and CARS A 3000 0 2200 00 B 600 C 2000 700 D 0 1000 Note that this is only a partial table. Let’s graph these combinations:
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PPF for Macland 3000 2200 Computers A B 2000 Cars 600 700 1000 C D
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3000 2200 Computers A B 2000 Cars 600 700 1000 Production Possibilities Frontier, PPF C D
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3000 2200 Computers H B A Unattainable 2000 Cars K C 600 700 1000 Production Possibilities Frontier, PPF D Attainable but inefficient
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Points A, B, C and D on the diagram are productively efficient – to produce these combos ll resources are used, given the technology. all resources are used, given the technology.
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This note was uploaded on 09/16/2011 for the course ECON 101 taught by Professor Unknown during the Spring '10 term at University of Toronto.

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Ch 2 PPF - Chapter 2 Production Possibilities The...

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