1. Efficiency and Tradeoffs in Production The Production Possibilities Curve

2. Graph the following: TelevisionsCars 016 814 1310 166 182 190

3. Televisions Cars 0 1616 1919 Production Possibilities Curve PPC

4. Production Possibilities Curve A graphical representation of the trade-offs encountered when switching resources from producing one good to another in the presence of fixed resources The possible mixes of production at maximum efficiency

5. Televisions Cars 0 1616 1919 Consider the following points: PPC AA CC DD BB A & B: Possible and Efficient C: Possible, but Inefficient D: Not Possible with given resources

6. Can the PPC Shift? What happens when there is an innovation that makes televisions faster (more efficient) to produce?

7. Televisions Cars 0 1616 1919 Production Possibilities Curve PPC 1 PPC 2   Sector-Specific Shift

8. Can the PPC Shift? What happens when labor productivity improves throughout the economy?

9. Televisions Cars 0 1616 1919 Production Possibilities Curve PPC 1 PPC 2    Economy-Wide Shift

10. Production Possibilities Curve Is there a relationship between the shape of the curve and the opportunity costs encountered in shifting production from ne good to another?

11. Figure 3.2 Increasing Opportunity Cost Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

12. Increasing Opportunity Costs Why? – Most efficient resources are first ones that are shifted over