Production Possibility Frontier Case Study

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THE PRODUCTION POSSIBILITY FRONTIER. The production possibility frontier (PPF) is a curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors. When predicting the production possibility frontiers for Brazil and United States the following factors such as labor, capital and technology, among others, will affect the resources available, which will dictate where the production possibility frontier lies. The production possibility frontier is also known as the production possibility curve or the transformation curve would be as follows. The two countries form a synergetic alliance where Brazil exclusively produces clothes while United States exclusively produces soda, with open…show more content…
The example used above (which demonstrates increasing opportunity costs, with a curve concave to the origin) is the most common form of PPF. It represents a disparity, in the factor intensities and technologies of the two production sectors. That is, as an economy specializes more and more into one product (such as moving from point B to point D), the opportunity cost of producing that product increases, because we are using more and more resources that are less efficient in producing it. With increasing production of butter, workers from the gun industry will move to it. At first, the least qualified (or most general) gun workers will be transferred into making more butter, and moving these workers has little impact on the opportunity cost of increasing butter production: the loss in gun production will be small. However, the cost of producing successive units of butter will increase as resources that are more and more specialized in gun production are moved into the butter…show more content…
Products requiring similar resources (bread and pastry, for instance) will have an almost straight PPF and so almost constant opportunity costs. More specifically, with constant returns to scale, there are two opportunities for a linear PPF: if there was only one factor of production to consider or if the factor intensity ratios in the two sectors were constant at all points on the production-possibilities curve. With varying returns to scale, however, it may not be entirely linear in either

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