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Explain what a production possibility frontier shows and describe the assumptions made in this model. Answer Question 1.5 from Chapter 2, page 52 of Hubbard,

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Explain what a production possibility frontier shows and describe the assumptions made in this model.

Answer Question 1.5 from Chapter 2, page 52 of Hubbard, Garnett, Lewis & O'Brien (2022), Essentials of Economics, 5th edition.

One of the trade-offs Tesla faces is between safety and the maximum range someone can drive an electric car before having to recharge it. For example, adding steel to a car makes it safer but also heavier, which results in fewer kilometers between recharges. Draw a hypothetical production possibility frontier that shows this trade-off faced by Tesla engineers.

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Tesla Motors When purchasing an electric vehicle, consumers must consider factors and trade-offs such as range-efficiency and safety. One way Tesla increases range-efficiency is by manufacturing lighter and smaller vehicles. In terms of safety, larger cars absorb greater impact during a collision, than smaller vehicles. As a result, consumers are most likely safer driving large vehicles. However, larger cars require more energy use and can affect maximum range. Both factors are in an intertwined relationship that involves opportunity costs, and managers at Telstra must make their decision based on the Production Possibility Frontier (PPC). We can then conclude that increasing safety results in reduced distances between battery recharges. Safety can be increased by using steel, however, at the expense of range due to increased weight. Tesla's Production Possibility Frontier. We can see here that the PPC will be shaped in a concave fashion, as Tesla gains an additional unit of safety, greater maximum range must in turn be sacrificed. The opportunity cost of an activity is the highest-valued alternative that is sacrificed to engage in said activity. For Telstra, the opportunity cost of producing one extra unit of safety, is the amount of units they will not be able to provide to increased range, as those resources have already been devoted to safety

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