Question

A real-world application of the Production Possibilities Model: In the 1940's the RAND Corporation put together a series of simulations about war between the USA and the USSR. In the end, they came out with a series of two "good" possibilities, number of battles won, and number of crew lives saved. The simulations applied different military strategies (the resources) and tracked the number of crew that survived, and the number of battles won (the outputs). The two outcomes were found to have an inverse relationship. (Spencer Banzhaf, "Retrospectives: The Cold-War Origins of the Value of Statistical Life," Fall 2014 Journal of Economic Perspectives (28:4, 213-26)). A military official in the USA assumes the country is operating at an efficient point (that is not an endpoint) and demands a change in strategy to increase the amount of lives saved for the same number of battles won. The best reason why that is impossible is:

Answer 1

Increasing the amount of lives saved for the same number of battles won is impossible in the above case because the economy is already operating at the efficient point which is the boundary point of the economy. It cannot increase the amount of lives saved if it remains on the same Production possibility frontier. PPF has to shift rightwards. Thus, as along as the economy remains on the given PPF's efficient or the boundary point it cannot increase the lives saved.