Efficient production and the production possibilities frontier. In addition to the ceteris paribus assumption, economic analysis is often carried out under the assumption of efficient production. According to the efficient production assumption, the economy is always using its resources and technology to produce the maximum number of goods possible. The efficient production assumption is frequently associated with the production possibilities frontier (PPF), a graphical device that is used for economic analysis of production decisions. The PPF measures the quantity of two goods that an economy is capable of producing with its currently available resources and technology. While economies typically produce more than two goods, the graphical analysis of the PPF is made easier by restricting the production possibilities of the economy to just two goods.
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Efficient Production, efficient production assumption