We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Economic Efficiency Essay Sample

essay
The whole doc is available only for registered users OPEN DOC

A limited time offer!

Get a custom sample essay written according to your requirements urgent 3h delivery guaranteed

Order Now

Economic Efficiency Essay Sample

In economics, the production possibility curve represents the maximum production capability of a firm or economy. The points on the curve represent combinations of manufactured goods that completely exhaust the productive capacity of the firm in question. It is the frontier of the firm’s producing ability. If the firm were to produce at a point inside of the curve, then we can construe that as the firm being less than efficient. Producing inside of the curve means that the firm produces a combination of goods which is less in quantity than combinations of goods at the PPC. This is because the firm is not producing the maximum number of units it can produce. The possibility of adding more outputs is there but because of some reason or another, the firm is not producing at maximum capacity.

An example of a government agency which is inside its PPC would be a school in a rural community. The school may have capacities for hundreds of students but only have a few dozens of pupils in the student body. The school can accept and educate more students but cannot due to simple demographics. This is inefficient as resources used to keep the school running are wasted because it is not at capacity. Desks which are already paid for sit unused, electricity to light the entire large classrooms even if there are students only in the front row, these are some of the ways the school building may be wasting resources because it is within its PPC. Moving towards the PPC would not only mean that the school makes a bigger impact on the local education but would also mean less wasted tax dollars.

Since the Christmas season is approaching, an apt example for a private entity operating inside its PPC would be a toy company which is facing shortages of its product. In a past Christmas season, Sony’s Playstation3 game console faced shortages after a supplier was unable to supply the needed lasers needed by the console. Due to the starvation of its manufacturing, Sony was unable to meet demand at a time when spending was at a seasonal high. This translated to lost revenues for that particular Holiday season. This is motivation for Sony to keep their supply chain streamlined so that they can operate at the PPC.

This generalized plot shows an imaginary PPC curve for Sony’s game division. The PPC curve represents the possibility frontier for the production of Playstation 2 and Playstation 3 units. The dot shows Sony’s actual production. We see that Sony could have produced additional Playstation 3 units without reducing its Playstation 2 productions. However, its supply chain problems prevented them from reaching this production capacity.

Bibliography

Mankiw, N.G. (2003) Principles of Economics. South Western College Publishing

Sid, V. (August 30, 2006) Blu-ray shortages may impact PS3 manufacturing. In Game Pro. Retrieved November 17, 2008 from http://www.gamepro.com/article/news/79735/blu-ray-shortages-may-impact-ps3-manufacturing/

We can write a custom essay

According to Your Specific Requirements

Order an essay
Get Access To The Full Essay
icon
300+
Materials Daily
icon
100,000+ Subjects
2000+ Topics
icon
Free Plagiarism
Checker
icon
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access
immediately?

Become a member

Your Answer Is Very Helpful For Us
Thank You A Lot!

logo

Emma Taylor

online

Hi there!
Would you like to get such a paper?
How about getting a customized one?

Can't find What you were Looking for?

Get access to our huge, continuously updated knowledge base

The next update will be in:
14 : 59 : 59
Become a Member