Production possibility curve is a graphical representation of alternative production possibilities that face an economy. A given economy can attain points that fall on the outside of the production possibilities curve in many ways. The first one is by facilitating trade with other external producers, since points outside the curve cannot be attained with existing resources and technologies alone. It is important to note that, without effective trade each nation will be forced to spend or consume what it is only able to produce (Frank, Bernanke, Antonovics & Heffetz, 2015). In an event that this happens in an economy, the production possibility curve will also be the consumption possibility curve. On the other hand, trade and specialization increases the availability of goods for consumption, compared to the quantities available in the national economy. Trade therefore enables the consumption of goods outside the curve.
An economy is said to be productively efficient if it is operating on the production possibility curve. This means it would be very impossible to produce an excess of one good without reducing the production of the other commodity or goods. Therefore, the economy chooses which good to be sacrificed so that the most essential ones are produced in the required amounts. An economy is said to be operating inefficiently if it is operating below the curve (Frank et al, 2015). This is because the existing resources could be relocated with the aim of producing more of one good or even both, without reducing their quantities. The other possible way of achieving the points is by shifting the curve outwards. This can be enabled by increasing the percentage of inputs like labor, capital and modern technological procedures which produces more output with the same levels of inputs.
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