The production possibilities curve for an economy that produces milk and cream is straight and downward-sloping if there is no specialization of resources in their production.
What is a production possibility curve?
- In economics, a production possibilities curve measures the maximum output of two goods with the same input.
- Any combination of the four production factors constitutes the input: labor, capital goods, natural resources (including land), and entrepreneurship.
What Effect Does the Production Possibilities Curve Have on the Economy?
- The production possibilities curve depicts the various combinations of fixed-resource production volumes for two goods.It is assumed that when one commodity's production increases, so does that of another.
- Points on the production curve indicate that an economy does not produce at its comparative advantage, and production outside the curve is impossible.
- The right proportion of the goods that can be produced is shown on the production possibilities curve.
The production possibilities curve for an economy that produces milk and cream is straight and downward-sloping if there is no specialization of resources in their production.
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