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shall use the production possibilities model to analyze Roadway’s ability to
produce goods and services.
A production possibilities curve illustrates the production choices
available to an economy. Recall that the production possibilities curve for a
particular country is determined by the factors of production and the
technology available to it.
Figure 17.1 "Roadway’s Production Possibilities Curve" shows a
production possibilities curve for Roadway. We assume that it produces
only two goods—trucks and boats. Roadway must be operating
somewhere on its production possibilities curve or it will be wasting
resources or engaging in inefficient production. If it were operating inside
the curve at a point such as D, then a combination on the curve, such as B,
would provide more of both goods (Roadway produces 3,000 more trucks
and 3,000 more boats per year at B than at D). At any point inside the
curve, Roadway’s production would not be efficient. Point E suggests an
even higher level of output than points A, B, or C, but because point E lies
outside Roadway’s production possibilities curve, it cannot be attained.
Figure 17.1Roadway’s Production Possibilities Curve

Attributed to Libby Rittenberg and Timothy Tregarthen
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