3 Efficiency in the production possibilities model Suppose I

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

Solution

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)