Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 2 - Part I - Thinking Like an Economist - Questions for Review: 7

Answer

The production possibilities frontier (PPF) demonstrates efficiency by acting as a visual representation of the different combinations of goods and services which can be produced when a system is run at maximum efficiency.

Work Step by Step

The frontier is bowed outwards due to the law of diminishing returns. On the curve, when capital production of "X" increases, the production of "Y" decreases and vice versa. These demonstrate efficiency by giving a visual demonstration of trade-offs and opportunity cost.
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