c) If the point c is inside the Production Possibility Frontier, what does that mean? The straight downward-sloping line is the production possibility frontier. False 3. A point inside a production possibilities curve represents things that can be produced. The remaining variables are exogenous. PPCs for increasing, decreasing and constant opportunity cost. B) efficient production points. With trade, a country may ______. Otherwise, you will receive a "0". All points inside the production possibility frontier represent: A) efficient production points. The PPF is the set of output combinations that generates full employment of resources—in this case, both labor and capital. C) feasible production points. Legal. 47. With trade, a country may ______. Figure 1 shows the production possibility frontier for consumption and capital goods. Use the following to answer question 5: Figure: Guns and Butter 5. | What does a point inside the production possibility frontier represent? This means that steel is assumed to be capital intensive and clothing production is assumed to be labor intensive. Answer: C 7. We're producing less than you could. Points outside the constraint, such as \(A\) and \(D\), are not feasible production points since there are insufficient capital resources. Practice: Interpreting graphs of the production possibilities curve (PPC) Everything within the production possibility frontier (PPF) represents a combination of outputs that is possible with existing resources. Production points on a PPF represent efficient use of all of the economy’s resources. If the amount produced is inside the curve, then all of the resources are not being used. The production possibility frontier can be derived in the fixed proportions case by using the exogenous factor requirements to rewrite the labor and capital constraints. The endpoints \(\frac{L}{a_{LC}}\) and \(\frac{L}{a_{LS}}\) represent the maximum quantities of clothing and steel that could be produced if all the labor endowments were allocated to clothing and steel production, respectively. Uh, an example of this is unemployment. False 4. Combinations of output that are inside the production possibilities frontier represent inefficient production. With clothing plotted on the horizontal axis, when the labor constraint is steeper than the capital constraint, clothing is labor intensive. The production possibility frontier illustrates that. So points outside the production possibility frontier indicate the reality of scarcity. Privacy Concepts covered include efficiency, inefficiency, economic growth and contraction, and recession. C. Points B and C are efficient. 11) Refer to Figure 2-1. Point A represents a point where all the resources in the economy are being used to produce capital goods. So this is the the thief, the tradeoffs between burgers and pizza or the amount of burgers and pizzas that we could get at each while using all … The slope of the labor constraint is \(-\frac{a_{LC}}{a_{LS}}\). Number of burgers. There should … The blue line is the capital constraint. This implies \( \frac{a_{LC}}{a_{LS}} > \frac{a_{KC}}{a_{KS}} \), which in turn implies (with cross multiplication) \( \frac{a_{KS}}{a_{LS}} > \frac{a_{KC}}{a_{LC}} \). C. Points B and C are efficient. All points inside the production possibility frontier represent: A) infeasible production points. What is the definition of production possibilities frontier?The production possibility frontier indicates the maximum production possibilities of two goods or services, assuming a fixed level of technology and only one choice between the two. A point beneath the curve indicates inefficiency, and a point beyond the curve indicates impossibility. The LibreTexts libraries are Powered by MindTouch® and are supported by the Department of Education Open Textbook Pilot Project, the UC Davis Office of the Provost, the UC Davis Library, the California State University Affordable Learning Solutions Program, and Merlot. C) economic growth. All points (A, B, C, and D) are efficient. Production Possibilities Frontier (PPF): With Diagram | Microeconomics. & Unemployed resources (labor, capital, physical resources) of any kind would result in an inefficient production level, and would be shown as a point to the left, or inside the curve. a. efficient but not feasible. Producing one good always creates a trade off over producing another good. Terms c) infeasible production points. @ libretexts.org or check out our status page at https: //status.libretexts.org and the section. Intensive and clothing production is assumed to be capital intensive and clothing production is assumed to labor. 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