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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

The first principle of economics discussed in Chapter 1 is that people face trade-offs. Use a production possibilities frontier to illustrate society's trade-off between two "goods"—a clean environment and the quantity of industrial output. What do you suppose determines the shape and position of the frontier? Show what happens to the frontier if engineers develop a new way of producing electricity that emits fewer pollutants.

To determine
Production possibility frontier.

Explanation

Figure 1 shows the production possibility frontier for cleanliness of environment and quantity of industrial output.

In Figure 1, the X axis measures cleanliness of environment and the Y axis measures quantity of industrial output. PPF1 and PPF2 show the shift of production possibility frontier...

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