Production possibility curve Scarcity inefficiency choice and opportunity cost

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Scarcity is illustrated by point F which lies outside the production possibility curve. We would like to produce more food and guns but it is not possible given our existing resources and efficiencies. • Inefficiency is indicated by point G and implies that not all the resources are being used fully. It is possible to have more of both goods by being on the production possibility curve at e.g., point d. • Choice is illustrated by the choice we need to make between available combinations along the production possibility curve. For instance we need to choose whether we are going to produce combination c or combination e. • Opportunity cost is illustrated by the negative slope of the curve which indicates that more of one good can only be obtained by sacrificing the other good. • In terms of this production possibility curve, the opportunity cost of increasing the production of guns by 3 million we need to sacrifice 300 tons of food. • One of the questions we study in economics, is how this choice is made by 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