Explain the concept of the production possibilities curve and understand the implications of its downward slope and bowed-out shape.

THE PRODUCTION POSSIBILITIES CURVE

L E A R N I N G O B J E C T I V E S

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 com-
parative advantage.