Answer to Question #206181 in Microeconomics for qianhe

Question

 a) Explain the production efficiency in production possibilities frontier. 

Answer 1

The PPF works under the assumption that the output of one commodity can only rise/ increase if the output of the other commodity falls/decreases, due to scarce available resources. Thus, PPF checks the efficiency with which two products can be produced simultaneously. 

Whenever we are producing a combination of goods that lie along the PPF, then we are targeting  production efficiency. If the combination of goods produced lies inside the PPF, then the society is productively inefficient.