Authors libby rittenberg 87
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comparative advantage in producing radios, so, if the firm goes from
producing 150 calculators and no radios to producing 100 radios, it
will produce them at Plant S. In the production possibilities curve for
both plants, the firm would be at M, producing 100 calculators at
Plant R.
Figure 2.11
2.3 Applications of the Production
Possibilities Model
LEARNING OBJECTIVES
1. Understand the argument for unrestricted international trade in
terms of economic specialization and comparative advantage.
2. Define economic growth in terms of the production possibilities
model and discuss factors that make such growth possible.
3. Explain the classification of economic systems, the role of government
in different economic systems, and the strengths and weaknesses of
different systems.
The production possibilities curve gives us a model of an economy. The
model provides powerful insights about the real world, insights that help
us to answer some important questions: How does trade between two
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
87
