ECONS 101 – 1st Edition Lecture 4 Outline of Last Lecture I. Production Possibilities Frontier (PPF) [Cont.]Outline of Current Lecture I. Production Possibilities Frontier (PPF) [Cont.] Part 3:a. Efficiencyb. Trade-OffsCurrent LectureProduction Possibilities Frontier (PPF) Scenario: [Cont.] Part 3:- The Solution:o Based on preferences, the society wishes to abate 2 tons of CO2 and produce 240 bushels of corn on the tract of land. (Scenario D) It is the Allocative Efficient point: - Marginal benefit from 1 more ton of CO2 is equal to the Marginal cost of obtaining 1 more ton of CO2. It is a Productively Efficient point:- It is on the PPF and we must sacrifice corn to abate more CO2.*Points on the PPF can be both allocative and productively efficient; it’s completely based on the situation at hand.- Types of PPF and Opportunity Cost:o The example had a “bowed out” PPF (as shown in other notes) This was due to increasing marginal costs. Different Opportunity Costs along the PPF:- Must measure the Opportunity Cost between the points – the slope of a line.o Potential for a Linear PPF Constant marginal costs Constant Opportunities along the PPF- Measuring the Opportunity Cost between a set of points should be the same for the all the points.- Economic Growth / Tradeo A combination can be reached beyond the PPFThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.o The PPF allows us to visualize a model of economic growth and trade Two Constraints  Technology and Resources- Investment to accumulate capital or change technologyo Comparative Advantage and Trade Shifting the PPF – Innovation:- Growth through investment:o Sacrifice some consumption to increase productivity. Shifts PPF curve to the right. Moving beyond the PPF – Trade- Comparative Advantage and Trade Together:o Two or more individuals/countries/firmso Specialize in the good or service that yields the lowest opportunity cost.- EXAMPLE:o You specialize in CO2, so you choose to produce 5 tons of CO2.o Your neighbors specialize in corn, so they produce bushels of corn. Trade here involves selling 2 tons of CO2 and buying 260 bushels of corn. This allows you to yield more for the same amount of resources than if you were producing it all