that can be produced when the economy’s resources are fully employed
and productively efficient.
Any point inside the curve, such as A, is productively inefficient. If the
inefficiency exists in industry X, then either some producer of X is
productively inefficient or industry X as a whole is productively
inefficient. In either case, it is possible to increase total production of
without using more resources, and thus without reducing the output of
This would take the economy from point A to point C. Similarly, if the
inefficiency exists in industry Y, production of Y could be increased,
moving the economy from point A to point B.
In Figure 12-2 , every point on the PPB is productively efficient. Is there
one point on the PPB that is “better” in some way than the others? The
answer is yes, and this brings us to the concept of allocative efficiency