Chapter 2, Problem 1VQP

To determine

Deriving production–possibility frontier (PPF).

Explanation of Solution

Production–possibility frontier is the combination of different combinations of two goods that a country can produce, while all the resources are utilized. Assume that a country is producing two goods say X and Y. Then, the given Table (1) shows different combinations of goods that a country can produce with fully utilized resources as shown below:

Table 1

Combination	Good X	Good Y
A	10	0
B	5	5
C	0	10

Use the given table to depict the production–possibility frontier as shown below:

In Figure 1, the horizontal axis represents good X and the vertical axis represents good Y. In the first combination, the country can produce 10 units of good X and 0 unit of good Y. In the second combination, the country can produce 5 units of both the goods. In the third combination, the country can produce 0 unit of good X and 10 units of good Y. The country can produce any of the given combinations of goods. These combinations of goods form production–possibility frontier.

Economics Concept Introduction

Production–possibility frontier (PPF): Production–possibility frontier or PPF curve shows the combination of the two commodities that the country produced efficiently using the given technology.