BSEN 401 Lecture Notes - Opportunity Cost, Forego
SchoolUniversity of Calgary
DepartmentBusiness and Environment
Course CodeBSEN 401
This preview shows half of the first page. to view the full 3 pages of the document.
PRODUCTION POSSIBILITIES FRONTIERS (FUNCTIONS, CURVES)
Definition: A Production Possibilities Frontier (Function, Curve) is the maximum output
combinations producible from a given set of resource inputs and a given set of technology.
The Production Possibilities Curve demonstrates Scarcity, Choice, and Opportunity Cost.
It also demonstrates Technological Efficiency, i.e., maximum output from given resources
e.g. We begin our discussion with an example.
Suppose that Canada is divided into 7 regions with identical resources of a million hectares
of land, a million hours of labour, and a million units of capital but different climate and quality
of land. Suppose further that each region can produce either wheat or apples but not a
combination of the two. The table gives the output of each region per year in millions of
The following table gives the total output combinations of the country as well as the
opportunity cost of those options.
Land in Wheat
Less BC & Nova
2/4 = 1/2
Less BC, NS, &
3/3 = 1
You're Reading a Preview
Unlock to view full version