3. Efficiency in the production possibilities model Suppose Ireland produces onl

Question

3. Efficiency in the production possibilities model

Suppose Ireland produces only two goods: wheat and blu rays. The following graph shows Ireland's current production possibilities frontier, along with six output combinations represented by black points (plus symbols) labeled A to F.

Complete the following table by indicating whether each point represents output combinations that are inefficient, efficient, or unattainable. Check all that apply.

Point

Inefficient

Efficient

Unattainable

Point

Inefficient

Efficient

Unattainable

A B C D E F 100 80 PPF 40 20 20 40 60 80 WHEAT (Millions of bushels

Explanation / Answer

Points D , E - unattainable (lie outside the PPF)

Points B, C - efficient (Lie on the PPF, productively efficient)

Points A, F - inefficient (lie inside the PPF, resources have not been used efficiently)

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