Chapter 1, Problem 23AA

To determine

To analyze reason behind the impossible situation of producing at point E which is outside the production possibilities for wood.

Explanation of Solution

Production possibility frontier (PPF) represents a possible combination of two commodities produced in an economy by utilizing available resources and technology. Since resources are available in a specific amount and is scarce so the economy cannot produce commodities and service that requires more resources than existing one.

The point at the PPF shows the maximum amount of goods that an economy can produce with its existing resources. The point outside the PPF i.e point E in the diagram shows the combination of bookshelves and tables that requires more resources than carpenter has. So, carpenter cannot produce 6 bookshelves and 4 tables.