Authors libby rittenberg 63
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5. An untapped deposit of natural gas is a natural resource. Once
extracted and put in a storage tank, natural gas is capital.
6. The White House is capital.
7. The local power plant is capital.
2.2 The Production Possibilities Curve
LEARNING OBJECTIVES
1. Explain the concept of the production possibilities curve and
understand the implications of its downward slope and bowed-out
shape.
2. Use the production possibilities model to distinguish between full
employment and situations of idle factors of production and between
efficient and inefficient production.
3. Understand specialization and its relationship to the production
possibilities model and comparative advantage.
An economy’s factors of production are scarce; they cannot produce an
unlimited quantity of goods and services.
A production possibilities curve is a graphical representation of the
alternative combinations of goods and services an economy can produce. It
illustrates the production possibilities model. In drawing the production
possibilities curve, we shall assume that the economy can produce only
two goods and that the quantities of factors of production and the
technology available to the economy are fixed.
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
63
