Society decide its optimal point on the production
How does society decide its optimal point on the production possibilities curve?
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1. Recall that society receives marginal benefits from each additional product consumed, and as long as this marginal benefit is more than the additional cost of the product, it is advantageous to have the additional product.
2. Conversely, if the additional (marginal) cost of obtaining an additional product is more than the additional benefit received, then it is not “worth” it to society to produce the extra unit.
3. Marginal benefits decline as society consumes more and more pizzas.
a. Beyond that, the added benefits would be less than the added cost.
b. At less than 200,000, the added benefits will exceed the added costs, so it makes sense to produce more.
4. Generalization: The optimal production of any item is where its marginal benefit is equal to its marginal cost. As an eg: this ought to come about at 7,000 robots for robots.
Suppose that, based on a nation’s production possibilities curve, for 10,000 pizzas domestically an economy must sacrifice to get the one additional industrial robot it desires, but can get that robot from another country in exchange for 9,000 pizzas. To the fol
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