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Production Possibilities Curve

Production Possibilities Curve. In this lesson, we will examine the various options available to producers. Students will be able to define the following terms: Production Possibilities Curve Efficiency Underutilization Production Possibilities Frontier. A Production Possibilities Curve.

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Production Possibilities Curve

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  1. Production Possibilities Curve • In this lesson, we will examine the various options available to producers. • Students will be able to define the following terms: Production Possibilities Curve Efficiency Underutilization Production Possibilities Frontier E. Napp/Helf

  2. A Production Possibilities Curve • Production Possibilities Curve is a model showing alternative ways of using resources. • THE LINE DEMONSTRATES MAXIMUM OUTPUTS OF VARIOUS COMBINATIONS. • If a farmer uses more of his land to grow corn, he has less land for cotton. E. Napp/Helf

  3. Corn Cotton Should a farmer grow corn or cotton? E. Napp/Helf

  4. What is the cost of producing more automobiles? E. Napp

  5. Efficiency • AN ECONOMY IS EFFICIENT WHEN IT USES RESOURCES TO MAXIMIZE PRODUCTION. • Why is it important to be efficient? E. Napp

  6. Look at the graph. Where is efficiency occurring? E. Napp

  7. Underutilization • Underutilization is the opposite of efficiency. • UNDERUTILIZATION IS WHEN AN ECONOMY DOESN’T USE ALL ITS RESOURCES. • Why do producers avoid the underutilization of resources? E. Napp

  8. Look at the graph. Where is underutilization occurring? E. Napp

  9. The Production Possibilities Frontier • The line on the graph that shows the maximum possible output combinations. • At the frontier, efficiency is occurring. • However, new technology can shift the frontier. Think about it! E. Napp

  10. Look at the graph. What is the opportunity cost for vacuuming each room? E. Napp

  11. Corn Broccoli Should a farmer grow corn or broccoli? What does A, B, C and D each represent? E. Napp/Helf

  12. Don’t Forget Scarcity! • A producer cannot produce everything. • A producer must make choices. • Remember: It’s all about scarcity. Our resources are limited but our wants and desires are unlimited. E. Napp

  13. It’s all about corn or broccoli. We can’t have it all. E. Napp

  14. Questions for Reflection: • What does a production possibilities graph show? • Define efficiency. • Why is it important to be efficient? • Define underutilization. • What is the production possibilities frontier? E. Napp

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