Principles of Microeconomics / Unit 17 MIC 1605 worked example, 60 to 90 seconds
Sample Question One: Inside the Frontier
The idea
Given a frontier and a point, classify the point. On the frontier: attainable and productively efficient. Inside: attainable but inefficient, since more of at least one good is possible without less of the other, from idle or misallocated resources. Outside: unattainable with present resources and technology, reachable only by growth or by trade in consumption. The exam's question puts a point inside and asks what it means; the answer is attainable but inefficient, and the reason is unemployment or misuse of resources, not a shortage of them.
In practice
Worked example: an economy can make one hundred guitars and no drums, fifty drums and no guitars, or sixty guitars with twenty drums on its frontier. Forty guitars with twenty drums lies inside: attainable, and inefficient, because sixty guitars with the same twenty drums is possible; the missing twenty guitars are idle workers or a factory used badly. Eighty guitars with forty drums lies outside: not attainable now. A recession moves the economy inside; a new machine moves the frontier out; a trade lets it consume outside while producing on.
Where people slip
Inefficient does not mean impossible, and unattainable does not mean inefficient; the two words answer different questions. And a point inside the frontier is not a point on a lower frontier; the frontier did not move, the economy did.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Unlocks
- Nothing yet depends on this.
Something wrong in this lesson? Flag it