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Chapter 12: Q.28 (page 297)

What does a point inside the production possibility frontier represent?

Short Answer

Expert verified

Inefficient resource allocation is represented by a point inside the production possibility frontier.

Step by step solution

01

Introduction

PPF stands for Production Possibility Frontier. It's a graph that shows the most cost-effective combinations of two items that can be made with limited resources.

02

Explanation

The PPF curve (shown below) depicts several combinations (from P to T) of economic output and environmental protection that are both productively efficient but have differing balances of both variables. PPF has the point M, which represents a combination of less than half of both variables. If the yield of variables is low, it suggests the variables are not being used efficiently or optimally. As a result, the resulting combination is inside the curve rather than on it. As a result, in terms of productivity,Mis inefficient.

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Most popular questions from this chapter

What is the difference between private costs and social costs?

As the extent of environmental protection expands, would you expect marginal costs of environmental protection to rise or fall? Why or why not?

An emissions tax on a quantity of emissions from a firm is not a command-and-control approach to reducing pollution. Why?

Consider the case of global environmental problems that spill across international borders as a prisoner’s dilemma of the sort studied in Monopolistic Competition and Oligopoly. Say that there are two countries, A and B. Each country can choose whether to protect the environment, at a cost of 10, or not to protect it, at a cost of zero. If one country decides to protect the environment, there is a benefit of 16, but the benefit is divided equally between the two countries. If both countries decide to protect the environment, there is a benefit of 32, which is divided equally between the two countries.

a. In Table 12.10, fill in the costs, benefits, and total payoffs to the countries of the following decisions. Explain why, without some international agreement, they are likely to end up with neither country acting to protect the environment.

Give an example of a positive externality and an example of a negative externality.
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