II.

The Production Possibilities

Frontier (PPF)
• PPF is a model that shows the combinations
of output that an economy can possibly
produce, given the available factors of
production and the available production
technology.

©2004 Prentice Hall Publishing Collinge/Ayers, 3/e

 The Economy of Castaway Island

Data Point Fish Caught per Day Coconuts Collected per Day
A 5 0
B 4 10
C 3 16
D 2 19
E 1 21
F 0 22

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 A Graph of a Production
Possibilities Frontier
Coconuts
22 F E
21 D
19
C
16

10 B

A
1 2 3 4 5 Fish
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 Efficient Points: on the PPF
• The economy is producing the most given
the resources and technology;

• There is no way to produce more of one

good without producing less of the other.

©2004 Prentice Hall Publishing Collinge/Ayers, 3/e

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 Efficient Points: on the PPF
The economy is producing the
Coconuts most; no way to produce more
22 F E of one good without producing
21 D less of the other.
19
C
16

10 B

A
1 2 3 4 5 Fish
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 Inefficient Points: inside the
PPF
Potential to increase the
Coconuts production of one good
22 F E
21 D without producing less
19 of the other.
C
16

10 G B

A
1 2 3 4 5 Fish
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 Inefficient Points: inside the PPF
• The economy is producing less than it could
due to unused or misallocated resources.

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 Infeasible Points: outside the
PPF
The economy cannot
Coconuts
22 F E produce at points
21 D H outside the PPF given
19
resources and
C
16 production
technology available.
10 B

A
1 2 3 4 5 Fish
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 Efficient and Feasible Points

Not
Feasible
Good Y

Feasible but All points on the PPF

are efficient and feasible.
Inefficient

Good X
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Opportunity Cost: on the PPF, the OC of producing one
good is the amount of the other good forgone.

Coconuts
22 F E The OC of 1 fish is 1
21 D
19 coconut given up
C
16

10 B

A
1 2 3 4 5 Fish
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Opportunity Cost: on the PPF, the OC of producing one
good is the amount of the other good forgone.

Coconuts
22 F E The OC of 2 fish is 3
21 D
19 coconuts given up
C
16

10 B

A
1 2 3 4 5 Fish
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Opportunity Cost: on the PPF, the OC of producing one
good is the amount of the other good forgone.

Coconuts
22 F E The OC of 3 fish is 6
21 D
19 coconuts given up
C
16

10 B

A
1 2 3 4 5 Fish
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 Opportunity Cost
Opportunity
Data Fish caught Coconuts Cost of Fish
collected per
Point per day day # of coconuts
forgone
F 0 22
E 1 21
D 2 19
C 3 16
B 4 10
A 5 0

©2004 Prentice Hall Publishing Collinge/Ayers, 3/e

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Opportunity Cost: on the PPF, the OC of producing one
good is the amount of the other good forgone.

Coconuts
22 F E The OC of 10
21 D
19 coconuts is 1 fish
C given up
16

10 B

A
1 2 3 4 5 Fish
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Opportunity Cost: on the PPF, the OC of producing one
good is the amount of the other good forgone.

Coconuts
22 F E The OC of 16
21 D
19 coconuts is 2 fish
C given up
16

10 B

A
1 2 3 4 5 Fish
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 Practice Problems
Opportunity
Coconuts Cost of
Data Fish caught
collected per Coconuts
Point per day day # of fish
forgone
F 0 22
E 1 21
D 2 19
C 3 16
B 4 10
A 5 0 0

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