Authors libby rittenberg 79
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living. Economists conclude that it is better to be on the production
possibilities curve than inside it.
Two things could leave an economy operating at a point inside its
production possibilities curve. First, the economy might fail to use fully the
resources available to it. Second, it might not allocate resources on the
basis of comparative advantage. In either case, production within the
production possibilities curve implies the economy could improve its
performance.
Idle Factors of Production
Suppose an economy fails to put all its factors of production to work. Some
workers are without jobs, some buildings are without occupants, some
fields are without crops. Because an economy’s production possibilities
curve assumes the full use of the factors of production available to it, the
failure to use some factors results in a level of production that lies inside
the production possibilities curve.
If all the factors of production that are available for use under current
market conditions are being utilized, the economy has
achieved full employment. An economy cannot operate on its production
possibilities curve unless it has full employment.
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
79
