BSEN 401 Lecture Notes - Opportunity Cost, Forego

• School: University of Calgary
• Department: Business and Environment
• Course: BSEN 401
• Professor: William Huddleston

Document Summary

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 and technology. 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 bushels. The following table gives the total output combinations of the country as well as the opportunity cost of those options.