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An unattainable mix

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An unattainable mix

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1. An unattainable combination

2. An inefficient combination (It is possible to get more of one good without giving up some of the other.) This is caused by unemployment of resources or underemployment of resources.

3. Productive Efficiency (Production is on the PPF.) On the PPF it is not possible to produce more of one good without giving up some of the other

4. Productive Efficiency (Production is on the PPF.)

5. Productive Efficiency (Production is on the PPF.)

6. Productive Efficiency (Production is on the PPF.)

7. What is the Marginal Cost of producing cars when we are producing 15,000 cars?

8. The slope of the PPF tells us the terms of the tradeoff. We approximate the slope by looking at the two nearest points to 15,000 cars.

9. Slope = -50/6 = -8.33 -50 6 The MC at 15,000 cars is approximately 8.33 bushels/car

10. At 20,000 cars the marginal benefit is just equal to the marginal cost. This is the optimal level of car production

11. Allocative Efficiency (The point on the PPF that society finds most desirable (20,100))