1. Specialization and production possibilities

Suppose France produces only cars and trucks. The resources that are used in the production of these two goods are not specializedthat is, the same set of resources is equally useful in producing both trucks and cars.

The shape of France's production possibilities frontier (PPF) should reflect the fact that as France produces more trucks and fewer cars, the opportunity cost of producing each additional truck .

The following graphs show two possible PPFs for France's economy: a straight-line PPF (PPF1PPF1) and a bowed-out PPF (PPF2PPF2).

Graph 1CARSTRUCKSPPF1

Graph 2CARSTRUCKSPPF2

Based on the previous description, the trade-off France faces between producing trucks and cars is best represented by .