The production possibility curve allows you to see all the possibilities for production. Usually, economists simplify by only looking at two different goods.
Let's take the Upper Peninsula of Michigan and compare the production of apples to the production of iron ore.
If we applied all our natural resources, labor, capital and entrepreneurial talent to producing just apples, we would produce 500 million bushels of apples. So we plot that point on the y-axis.
If we applied all our natural resources, labor, capital and entrepreneurial talent to producing just iron ore, we would produce 500 billion tons of iron ore. So, we plot that point on the x-axis.
The line that connects those two points is the production possibility frontier curve. Anything on that line is considered to be efficient production because it uses all the resources available.
All production points below the line are considered inefficient.
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