microbook_3e-page28

microbook_3e-page28 - x Add a red line whose slope...

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Production Possibilities Frontier x PPF – all combinations of goods that can be produced if resources are used efficiently. One can produce at or below the PPF, but not above it. In one day, Colleen can: x cut 12 logs or gather 10 bushels x or produce a combination , such as: 6 logs and 5 bushels. In one day, Bill can: x cut 5 logs or gather 8 bushels x or produce a combination , such as: 2.5 logs and 4 bushels. Slope of the PPFs (above) is: –1*opp. cost of gathering food Gains from Trade
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Unformatted text preview: x Add a red line whose slope represents the relative price: bushel log 1 If Colleen specializes in cutting logs: x she can trade some of her logs for bushels of food and x consume a combination that exceeds any combination that she could produce on her own. If Bill specializes in gathering food: x he can trade some of his bushels of food for logs and x consume a combination that exceeds any combination that he could produce on his own. Page 28...
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