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14 Define a PPF. Provide an interpretation for the slope of a PPF. Which efficiency concept...

14 Define a PPF. Provide an interpretation for the slope of a PPF. Which efficiency concept does this relate to? Give a rationale for why a competitive equilibrium solves this concept.

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Answer #1

PPF refers to the production possibility Frontier. it shows the different combination of two products that can be produced with available resources.

Slope of PPF depicts the rate at which production of one good is sacrificed in order to increase output of another good.

All point on PPF are Pareto Efficient.

Perfectly competitive market operates where P = MC or this market is allocatively efficient. All the points on PPF are efficient and point below the PPF are inefficient.

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