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Chapter 12: Q 28. (page 297)

What does a point inside the production possibility frontier represent?

Short Answer

Expert verified

A point inside the production possibility frontier represents a production inefficiency.

Step by step solution

01

Step 1. Production possibility curve.

A production possibility curve shows various combinations of goods and services produced in an economy with the given resources and technologies.

02

Step 2. A point inside the production possibility frontier.

A point inside the production possibility frontier represents a production inefficiency. Productive inefficiency means when the resources of an economy are underutilized and there can be an improvement.

Such an economy indicates that more economic output or environmental protection could be achieved at no additional costs.

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Most popular questions from this chapter

What arguments do low-income countries make in international discussions of global environmental clean-up?

Identify whether the market supply curve will shift right or left or will stay the same for the following:

a. Firms in an industry are required to pay a fine for their carbon dioxide emissions.

b. Companies are sued for polluting the water in a river.

c. Power plants in a specific city are not required to address the impact of their air quality emissions.

d. Companies that use fracking to remove oil and gas from rock are required to clean up the damage.

Identify the following situations as an example of a negative or a positive externality:

a. You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds.

b. Your neighbor paints his house a hideous color.

c. Investments in private education raise your country’s standard of living.

d. Trash dumped upstream flows downstream right past your home.

e. Your roommate is a smoker, but you are a nonsmoker.

In the tradeoff between economic output and environmental protection, what do the combinations on the production possibility curve represent?

What are better-defined property rights and what incentive do they provide to account for external costs?
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