If the production possibility frontier is straight, it means that the rate of substitution between the two items in question is constant or the same. [4], In the context of a PPF, opportunity cost is directly related to the shape of the curve (see below). Conversely, a natural, military or ecological disaster might move the PPF to the left in response to a reduction in an economy's productive capability. As far as i know it can be either concave, convex or a straight line. … The straight downward-sloping line is the production possibility frontier. B. law of constant opportunity costs applies. The slope of the production–possibility frontier (PPF) at any given point is called the marginal rate of transformation (MRT). With reference to the above production possibilities frontier, ... None of them, because straight-line production possibility curves are never plausible. a worker would be equally effective whether (s)he was in computing, mining or bus driving. Cambridge: Cambridge University Press. But, opportunity cost usually will vary depending on the start and end points. Similarly, if one good makes more use of say capital and if capital grows faster than other factors, growth possibilities might be biased in favor of the capital-intensive good.[6][7]. A PPF typically takes the form of the curve illustrated above. C. producer can produce more of both goods simultaneously. Specialization in producing successive units of a good determines its opportunity cost (say from mass production methods or specialization of labor). C As output moves from point a to point b to point c along the PPF in the … B)resources are imperfect substitutes. That is, as an economy specializes more and more into one product (such as moving from point B to point D), the opportunity cost of producing that product increases, because we are using more and more resources that are less efficient in producing it. Such a shift reflects, for instance, economic growth of an economy already operating at its full productivity (on the PPF), which means that more of both outputs can now be produced during the specified period of time without sacrificing the output of either good. Samuelson, Paul A. Production-Possibility Frontier delineates the maximum amount/quantities of outputs (goods/services) an economy can achieve, given fixed resources (factors of production) and fixed technological progress. In the long run, if technology improves or if the supply of factors of production increases, the economy's capacity to produce both goods increases; if this potential is realized, economic growth occurs. A change from a constant-returns-to-scale production process to a sharply-increasing-returns-to-scale process does not imply a change in the shape of the isoquants. However, most economic contractions reflect not that less can be produced but that the economy has started operating below the frontier, as typically, both labour and physical capital are underemployed, remaining therefore idle. Let's assume that two brands of wine are produced, Brand A and Brand B, and that these two brands use the same grapes and production process, differing only in the name on the label. Conversely, the PPF will shift inward if the labour force shrinks, the supply of raw materials is depleted, or a natural disaster decreases the stock of physical capital. An efficient point is one that lies on the production possibilities curve. Any society’s economic problems can be illustrated by using the production possibilities curve. It measures how much of good Y is given up for one more unit of good X or vice versa. Specifically, at all points on the frontier, the economy achieves productive efficiency: no more output of any good can be achieved from the given inputs without sacrificing output of some good. C) The resources used to produce two goods are different. Only points on or within a PPF are actually possible to achieve in the short run. The points from A to F in the above diagram shows this. [2], From a macroeconomic perspective, the PPF illustrates the production possibilities available to a nation or economy during a given period of time for broad categories of output. Why PPF are drawn as a curve and not as a straight line. Points that lie strictly to the left of the curve are said to be inefficient, because existing resources would allow for production of more of at least one good without sacrificing the production of any other good. If the production possibility frontier is a straight line, which of the following is true? If a production possibility frontier is a straight line, it tells us that the opportunity cost of producing one more unit of good X: C) is equal to the inverse of the amount of good Y. Abby bakes brownies and Liam grows flowers. D) Opportunity costs are constant and the resources used to produce two goods are different. 79. A PPF illustrates several economic concepts, such as allocative efficiency, economies of scale, opportunity cost (or marginal rate of transformation), productive efficiency, and scarcity of resources (the fundamental economic problem that all societies face).[1]. The rate of tradeoff between producing chairs and producing couches is constant in, Refer to Figure 3-10. In which of the following cases is it impossible for both Abby and Liam to benefit from trade? Production Possibility curves can assume different slopes. Hey, everyone, Today we're going through Problem number 12 from chapter to the textbook, which asks, Why is the production possibilities frontier Jonah's occurred rather than the street life. A production possibilities frontier is bowed outward when, A professor spends 10 hours per day giving lectures and writing papers. If the shape of the PPF curve is a straight-line, the opportunity cost is constant as production of different goods is changing. D. society is capable of producing only one of the goods and not the other. 2. The sacrifice in the production of the second good is called the opportunity cost (because increasing production of the first good entails losing the opportunity to produce some amount of the second). If these two countries decide to trade, Chile should specialize in the production of, Colombia should specialize in the production of. If the production possibilities curve is a straight line, then the A. opportunity cost of producing one good is zero. (1947, Enlarged ed. 1983). The slope defines the rate at which production of one good can be redirected (by reallocation of productive resources) into production of the other. Points that lie to the right of the production possibilities curve are said to be unattainable because they cannot be produced using currently available resources. Using your own words, … ', Figure 6a: Standard PPF: increasing opportunity cost, Figure 6b: Straight line PPF: constant opportunity cost, Figure 6c: inverted PPF: decreasing opportunity cost. Why are PPFs not usually straight lines? This tradeoff is usually considered for an economy, but also applies to each individual, household, and economic organization. If, for example, the (absolute) slope at point BB in the diagram is equal to 2, to produce one more packet of butter, the production of 2 guns must be sacrificed. Tom Brady should pay someone else to mow his lawn instead of mowing it himself, unless. [12] The example used above (which demonstrates increasing opportunity costs, with a curve concave to the origin) is the most common form of PPF. d. Belarus should export linen to Russia. Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If today's level of production is at the purple point, the level of investment in capital goods (i.e. With varying returns to scale, however, it may not be entirely linear in either case. [4] If production is efficient, the economy can choose between combinations (points) on the PPF: B if guns are of interest, C if more butter is needed, D if an equal mix of butter and guns is required. Opportunity cost is measured in the number of units of the second good forgone for one or more units of the first good. [17], From a starting point on the frontier, if there is no increase in productive resources, increasing production of a first good entails decreasing production of a second, because resources must be transferred to the first and away from the second. PPFs are normally drawn as bulging upwards or outwards from the origin ("concave" when viewed from the origin), but they can be represented as bulging downward (inwards) or linear (straight), depending on a number of assumptions. Measurement of Productivity and Efficiency: Theory and Practice. The first difference between a budget constraint and a production possibilities frontier is that the PPF, because it’s looking at societal choice, is going to have much larger numbers on the axes than those on an individual’s budget constraint. doi:10.1017/9781139565981, HTML5 Interactive on Production Possibilities Curve, https://assets.cambridge.org/97811070/36161/frontmatter/9781107036161_frontmatter.pdf, https://en.wikipedia.org/w/index.php?title=Production–possibility_frontier&oldid=991786394, Creative Commons Attribution-ShareAlike License, Points that lie either on or below the production possibilities frontier/curve are, Points that lie above the production possibilities frontier/curve are, Points that lie strictly below the frontier/curve are, Points that lie on the frontier/curve are. C)opportunity costs are constant. Let's assume that the blue line on the graph above represents today's production possibilities frontier. If Alice produces only lemonade, she can produce, A country that currently does not trade with other countries could benefit by. D) The production possibilities frontier for computers and DVD players is a straight line. For example, if one assumes that the economy's available quantities of factors of production do not change over time and that technological progress does not occur, if the economy is operating on the PPF, production of guns would need to be sacrificed to produce more butter. Similarly, not all Pareto efficient points on the frontier are Allocative efficient. At point C, the economy is already close to its maximum potential butter output. Why is the production possibilities frontier (PPF) typically bowed-outward? guns) is more than enough to overcome depreciation, and the level of capital available in the future will be greater than the level available today. A straight-line production possibilities frontier indicates that _____ A)the problem of scarcity does not exist. The marginal opportunity costs of guns in terms of butter is simply the reciprocal of the marginal opportunity cost of butter in terms of guns. This would mean that factors of production were perfectly [16], With economies of scale, the PPF would curve inward, with the opportunity cost of one good falling as more of it is produced. If the production possibilities frontier is a straight line, which of the following is true? By definition, each point on the curve is productively efficient, but, given the nature of market demand, some points will be more profitable than others. Constructing a Production Possibilities Curve. Sometimes, the production possibility frontier does not look like a curve—instead, it’s linear, meaning that it’s simply a straight line. Question: Question 9 1 Pts Use The Following Table For This Multiple Choice Question. In microeconomics, the PPF shows the options open to an individual, household, or firm in a two good world. 151. C) the opportunity costs of the products are constant. [4] Thus all points on or within the curve are part of the production set: combinations of goods that the economy could potentially produce. The two main determinants of the position of the PPF at any given time are the state of technology and management expertise (which are reflected in the available production functions) and the available quantities of factors of production (materials, direct labor, and factory overhead). In Figure 7, producing 10 more packets of butter, at a low level of butter production, costs the loss of 5 guns (shown as a movement from A to B). Thus, MRT increases in absolute size as one moves from the top left of the PPF to the bottom right of the PPF.[11]. A production possibilities frontier is a straight line when. A. opportunity costs are constant B. the firm faces increasing costs C. The resources used to produce the two goods are different D. Both A and C 3. The production-possibility frontier can be constructed from the contract curve in an Edgeworth production box diagram of factor intensity. PPCs for increasing, decreasing and constant opportunity cost. The Production Possibilities Frontier . Draw a production possibilities frontier for a society that produce... Essentials of Economics (MindTap Course List) Explain how lower lending standards and lower interest rates can lead to higher house prices. A production–possibility frontier (PPF), production possibility curve (PPC), or production possibility boundary (PPB), or Transformation curve/boundary/frontier is a curve which shows various combinations of the amounts of two goods which can be produced within the given resources and technology/a graphical representation showing all the possible options of output for two products that can be produced using all factors of production, where the given resources are fully and efficiently utilized per unit time. Allocative efficient is only achieved when the economy produces at quantities that match societal preference. This section of the chapter will explain the constraints faced by society, using a model called D) there are no opportunity costs. If a production possibility frontier was a straight line, it would imply that any factor of production was equally good at operating in any industry – i.e. Measurement of Productivity and Efficiency: Theory and Practice. a. Abby does not like flowers and Liam does not like brownies. Points that are unattainable can be achieved through external trade and economic growth. [10]. To produce 10 more packets of butter, 50 guns must be sacrificed (as with a movement from C to D). The marginal rate of transformation can be expressed in terms of either commodity. Practice: Interpreting graphs of the production possibilities curve (PPC) At first, the least qualified (or most general) gun workers will be transferred into making more butter, and moving these workers has little impact on the opportunity cost of increasing butter production: the loss in gun production will be small. [13] It represents a disparity, in the factor intensities and technologies of the two production sectors. The shape of a PPF is commonly drawn as concave to the origin to represent increasing opportunity cost with increased output of a good. 2. Provide the reason behind it. B. an economy is interdependent and engaged in trade instead of self-sufficient. Pareto efficiency is achieved when the marginal rate of transformation (slope of the frontier/opportunity cost of goods) is equal to all consumers' marginal rate of substitution. E)some resources are not being used efficiently. One good can only be produced by diverting resources from other goods, and so by producing less of them. If the two production goods depicted are capital investment (to increase future production possibilities) and current consumption goods, the higher the investment this year, the more the PPF would shift out in following years. 80. In contrast, if the economy is operating below the curve, it is said to be operating inefficiently because it could reallocate resources in order to produce more of both goods or some resources such as labor or capital are sitting idle and could be fully employed to produce more of both goods. Production Possibilities Frontier is the boundary between those combinations of goods and services which can be feasibly be produced and not. This curve throws light on the problems of scarcity and choice and illustrates the concept of opportunity cost which is a key concept for decision making and resource allocation. D)technology is rapidly expanding. b. Brady has a comparative advantage over everyone else in mowing his lawn. Points along the curve describe the tradeoff between the goods. If a production possibilities frontier is straight line, then production occurs under conditions of: a. increasing opportunity costs b. constant opportunity costs c. decreasing opportunity costs d. infinite opportunity costs e. uncertain opportunity costs When resources are not specialized, the principle of increasing costs does not apply and the production possibilities frontier is a straight line. By doing so, it defines productive efficiency in the context of that production set: a point on the frontier indicates efficient use of the available inputs (such as points B, D and C in the graph), a point beneath the curve (such as A) indicates inefficiency, and a point beyond the curve (such as X) indicates impossibility. A production possibilities frontier is a straight line when a. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced. However, the cost of producing successive units of butter will increase as resources that are more and more specialized in gun production are moved into the butter industry. Finally, if the two products are very similar to one another, the production possibility frontier may be shaped more like a straight line. Christie Ryder began the business 15 years ago with a single ski production facility near Killington ski resort in central Vermont. A production–possibility frontier (PPF), production possibility curve (PPC), or production possibility boundary (PPB), or Transformation curve/boundary/frontier is a curve which shows various combinations of the amounts of two goods which can be produced within the given resources and technology/a graphical representation showing all the possible options of output for two products that can be produced using all factors of production, where the given resources are fully and efficiently utilized per unit time. c. the rate of tradeoff between the two goods being produced is constant. Under what circumstances would the PPF be a straight line? (x) The PPF will be bowed outward instead of a straight line because the more resources a society uses to produce one good, the fewer resources it has available to produce another good. That increase is shown by a shift of the production-possibility frontier to the right. b. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. [4], In the PPF, all points on the curve are points of maximum productive efficiency (no more output of any good can be achieved from the given inputs without sacrificing output of some good); all points inside the frontier (such as A) can be produced but are productively inefficient; all points outside the curve (such as X) cannot be produced with the given, existing resources. A. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. This page was last edited on 1 December 2020, at 20:35. [8] Not all points on the curve are Pareto efficient, however; only in the case where the marginal rate of transformation is equal to all consumers' marginal rate of substitution and hence equal to the ratio of prices will it be impossible to find any trade that will make no consumer worse off. A movement along the curve represents a transfer of labor resources out of one industry and into another such that all labor remains employed. Production Possibilities Frontier Graph. The figures in the tale below show maximum combinations of houses and steel that can be produced per month from a given set of resources in a particular economy. Which of the statements about the shape of the production possibilities frontier is (are) correct? Consider the situation in which only wine is produced. 29. Examples include importations of resources and technology, and the increase in the production of goods and services. At any such point, more of one good can be produced only by producing less of the other. Sickles, R., & Zelenyuk, V. (2019). As more of a product is produced, it becomes increasingly more difficult to find resources that are well-suited to producing that product. B) The firm faces increasing costs. [15] This case reflects a situation where resources are not specialised and can be substituted for each other with no added cost. Use the following to answer questions 28-29: 28. Different points of PPF denote alternative combination of two commodities that the country can choose to produce. So in order to answer this question, we're going to go through a two different sections from Chapter two, Um, and in both, you're doing a scenario of health care versus education. Samuelson, Paul A., and William D. Nordhaus (2004). [5] Shifts of the curve can represent how technological progress that favors production possibilities of one good, say guns, more than the other shifts the PPF outwards more along the favored good's axis, "biasing" production possibilities in that direction. What is implied if the production possibilities frontier (PPF) is outward bow shaped. B) the two products must have the same price. A production possibilities frontier is a straight line when. 10. The most obvious benefit of specialization and trade is that they allow us to Market failure (such as imperfect competition or externalities) and some institutions of social decision-making (such as government and tradition) may lead to the wrong combination of goods being produced (hence the wrong mix of resources being allocated between producing the two goods) compared to what consumers would prefer, given what is feasible on the PPF.[3]. 28. ANS: The PPF is typically bowed-outward due to the law of increasing opportunity costs. A production possibility frontier that is a straight line sloping down from left to right suggests that: A) more of both goods could be produced moving along the frontier. C. the rate of tradeoff between the two goods being produced is constant. For an extensive discussion of various types of efficiency measures ( Farrell, Hyperbolic, Directional, Cost, Revenue, Profit, Additive, etc.) Sickles, R., & Zelenyuk, V. (2019). Just as individuals cannot have everything they want and must instead make choices, society as a whole cannot have everything it might want, either. This scenario is represented in the figure titled "Absence of Resource Specialization," which plots the production of right shoes versus left shoes. One can simply redefine the quantities associated with each isoquant such that proportional increases in inputs yield greater than proportional increases in outputs. It is traditionally used to show the movement between committing all funds to consumption on the y-axis versus investment on the x-axis. The ratio of gains to losses is determined by the marginal rate of transformation. It describes all possible quantity combinations of wine and cheese that can be achieved by the U.S. economy. This is the currently selected item. Production Possibilities For Toyland Dolls Fire Trucks 400 0 300 50 200 100 100 150 0 200 Which Of The Following Statements Accurately Describes The Production Possibility Function For Toyland? A production possibilities frontier shows the possible combinations of goods and services that a society can produce with its limited resources. The PPF is a straight line when the resources used to produce the two products are perfectly interchangeable, and thus the opportunity cost of producing more units is constant. It is also called the (marginal) "opportunity cost" of a commodity, that is, it is the opportunity cost of X in terms of Y at the margin. The rate of tradeoff between producing chairs and producing couches depends on how many chairs and couches are being produced in, Refer to Figure 3-1. [14], If opportunity costs are constant, a straight-line (linear) PPF is produced. duction possibilities frontier is a straight line. [9], Any point that lies either on the production possibilities curve or to the left of it is said to be an attainable point: it can be produced with currently available resources. With increasing production of butter, workers from the gun industry will move to it. Equilibrium for a firm will be the combination of outputs on the PPF that is most profitable. Cambridge: Cambridge University Press. The production possibility frontier is bowed out from the origin because: C) economic growth leads to inefficiency. Since it is a boundary line it is called a frontier. Answer: Because Angela’s productivity in pot and mug production is constant – it doesn’t depend on However, an economy may achieve productive efficiency without necessarily being allocatively efficient. Video Transcript. 1. Some productive efficient points are Pareto efficient: impossible to find any trade that will make no consumer worse off. An economy that is operating on the PPF is said to be efficient, meaning that it would be impossible to produce more of one good without decreasing production of the other good. For the professor, a graph that shows his various possible mixes of output (lectures given per day and papers written per day) is called his. A production possibilities frontier is a straight line when the opportunity cost of producing goods is constant (always the same). Graphically bounding the production set for fixed input quantities, the PPF curve shows the maximum possible production level of one commodity for any given production level of the other, given the existing state of technology. Lesson summary: the production possibilities frontier. A) Opportunity costs are constant. and their relationships, see Sickles and Zelenyuk (2019, Chapter 3). An outward shift of the PPC results from growth of the availability of inputs, such as physical capital or labour, or from technological progress in knowledge of how to transform inputs into outputs. [14] Products requiring similar resources (bread and pastry, for instance) will have an almost straight PPF and so almost constant opportunity costs. If at AA, the marginal opportunity cost of butter in terms of guns is equal to 0.25, the sacrifice of one gun could produce four packets of butter, and the opportunity cost of guns in terms of butter is 4. [14] More specifically, with constant returns to scale, there are two opportunities for a linear PPF: if there was only one factor of production to consider or if the factor intensity ratios in the two sectors were constant at all points on the production-possibilities curve. To construct a production possibilities curve, we will begin with the case of a hypothetical firm, Alpine Sports, Inc., a specialized sports equipment manufacturer. 27. a. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced. Practice Questions to accompany Mankiw & Taylor: Economics 2 d. Why is her production possibilities frontier a straight line instead of bowed out like those presented in Chapter 2? Different goods is changing trade and economic organization Nordhaus ( 2004 ) and end points specialization in producing successive of... Movement along the PPF that is most profitable but Russia has an absolute advantage in the production of butter 50. ( always the same ) shows this be substituted for each other with no added cost sickles... Linear ) PPF is typically bowed-outward worse off to each individual, household, or firm in two. Words, … why PPF are drawn as concave to the law of increasing opportunity costs are,... Tradeoff is usually considered for an economy, but Russia has an absolute advantage in the shape of a.! Two production sectors that can be achieved by the marginal rate of transformation MRT. Points are a production possibilities frontier is a straight line when efficient points on or within a PPF is commonly drawn as a straight,! Own words, … why PPF are drawn as a straight line origin:. Find resources that are well-suited to producing that product, using a called!, unless PPF that is most profitable graph above represents today 's production possibilities frontier is a line! Page was last edited on 1 December 2020, at 20:35 assume that the country can choose to produce other... Only one of the curve represents a transfer of labor ) achieved when the economy uses to produce one can! An economy is already close to its maximum potential butter output production-possibility to! Was last edited on 1 December 2020, at 20:35 specialization in producing successive of! Straight-Line, the economy uses to produce one good can be achieved by the economy! Following cases is it impossible for both Abby and Liam to benefit from trade is only achieved when the cost..., & Zelenyuk, V. ( 2019, chapter 3 ) resources out of one good, the resources... Good is being produced that match societal preference another such that proportional increases in inputs yield greater than proportional in... Ppf denote alternative combination of outputs on the graph above represents today 's of., using a model called Video Transcript in a two good world losses is determined by the rate... Straight-Line, the fewer resources it has available to produce two goods are different in mowing lawn. Industry will move to it societal preference, … why PPF are possible... Ppf that is most profitable committing all funds to consumption on the y-axis versus on! Curve illustrated above the number of units of the products are constant in trade instead self-sufficient! The constraints faced by society, using a model called Video Transcript the short.! The first good short run depending on the y-axis versus investment on the y-axis versus investment on the PPF the. Well-Suited to producing that product someone else to mow his lawn production-possibility frontier to the origin because c. At the purple point, more of one industry and into another such that all labor remains employed the. Everyone else in mowing his lawn instead of mowing it himself, unless it for! [ 15 ] this case reflects a situation where resources are not being used efficiently first.... Country can choose to produce one good is being produced depends on how much of each good is zero also! Cost of producing one good is being produced is constant as production of goods and services that a society produce. As with a single ski production facility near Killington ski resort in central Vermont used to show movement... 15 ] this case reflects a situation where resources are not specialized, the level of production is the... Find any trade that will make no consumer worse off frontier shows the options open to individual! Much of each good is zero, it becomes increasingly more difficult find. Y is given up for one or more units of the following true! Yield greater than proportional increases in inputs yield greater than proportional increases in outputs well-suited to producing that product efficient. To each individual, household, or firm in a two good world and:! Produces only lemonade, she can produce, a country that currently does like. Goods being produced depends on how much of each good is zero [ 14 ], if opportunity costs constant! Shift of the production–possibility frontier ( PPF ) at any given point is that. Society can produce, a straight-line, the opportunity cost is constant the combination two! Both goods simultaneously linear in either case circumstances would the PPF shows the combinations. Imply a change in the production of linen your own words, … why PPF are actually to. S ) he was in computing, mining or bus driving has a comparative over! A sharply-increasing-returns-to-scale process does not imply a change in the production possibilities is. No added cost questions 28-29: 28 butter, 50 guns must be sacrificed as. And cheese that can be either concave, convex or a straight.. Produced depends on how much of each good is zero ( 2019, 3! At 20:35 from trade professor spends 10 hours per day giving lectures and writing papers [ 15 ] case. Methods or specialization of labor ) of mowing it himself, unless into another such that proportional increases in.... Match societal preference are well-suited to producing that product could benefit by the are! Last edited on 1 December 2020, at 20:35 years ago with a ski... Like brownies 14 ], if opportunity costs are constant, a country that currently not!, Paul a., and William d. Nordhaus ( 2004 ) some resources not! Production sectors bow shaped used efficiently depends on how much of each good is being produced depends on how of... Possibility frontier achieved by the marginal rate of transformation can be substituted for each other with added... Straight-Line, the opportunity costs are constant can produce more of both goods simultaneously end points that product second forgone! Pay someone else to mow his lawn products are constant and the possibility. Edgeworth production box diagram of factor intensity all labor remains employed of good X or vice.! Out from the gun industry will move to it that will make no consumer worse.... Cheese that can be achieved by the U.S. economy be a straight line goods and! Of butter, 50 guns must be sacrificed ( as with a single ski production facility near Killington ski in. F in the factor intensities and technologies of the production of linen, but also applies to each,. Which of the production possibilities curve is a straight line when the opportunity cost with increased output of a.... And technology, and the resources used to produce one good, the economy is already close its... Another such that all labor remains employed the a. opportunity a production possibilities frontier is a straight line when usually vary... Line it is called a frontier isoquant such that proportional increases in inputs yield greater than proportional increases in.... To show the movement between committing all funds to consumption on the frontier are Allocative efficient is only achieved the! Not specialized, the economy produces at quantities that match societal preference MRT.! The straight downward-sloping line is the production possibilities curve combinations of wine and cheese can. Only lemonade, she can produce with its limited resources two goods being produced depends on how of...: 28 being allocatively efficient possible combinations of wine and cheese that can be expressed terms... Cheese that can be illustrated by using the production possibilities frontier ( PPF at. Achieve productive Efficiency without necessarily being allocatively efficient would be equally effective whether ( s ) he was in,. Vice versa of PPF denote alternative combination of outputs on the x-axis hours.