Draw a production possibilities curve with public goods on the vertical axis and private goods on the horizontal axis. Assuming the economy is initially operating on the curve, indicate how the production of public goods might be increased. How might the output of public goods be increased if the economy is initially operating at a point inside the curve?

The Production Possibility Curve (PPC) shows different combinations of public and private goods that can be produced by fully utilizing the given resources and technology.

The PPC is constructed by plotting the quantity of private goods on the x-axis and the quantity of public goods on the y-axis.

If an economy is operating on a point on the PPC, an increase in one of the goods leads to a decrease in the production of the other as the resources are already fully utilized. Thus, a movement from point ‘a’ to ‘b’, leading to an increase in the quantity of public goods from $Y_{1}to{Y}_2$ can only be achieved if the production of private goods decreases from$X_{1}to{X}_2$.

An economy operating inside the PPC is not working efficiently, and there is a wastage of economic resources. Suppose an economy is operating a point inside the PPC. In that case, an increase in one of the goods can be achieved by utilizing the existing amount of resources and technology efficiently.

Thus, a movement from point ‘c’ to ‘b’, leads to an increase in the quantity of public goods from $Y_{3}to{Y}_2$along with an increase in the production of private goods from $X_{3}to{X}_2$. The production of both goods increases.