Shows the combinations of two goods that are possible for a society to produce at full employment. Points on or inside the PPF are attainable, and those outside of the frontier are unattainable

The value of the next best alternative; what you give up to do something or purchase something

The process of converting resources (factors of production)land, labor, capital, and entrepreneurial ability-into goods and services

Productive resources include land (land and natural resources), labor (mental and physical talents of people), capital (manufactured products used to produce other products), and entrepreneurial ability (the combining of the other factors to produce products and assume the risk of the business)

Includes the mental and physical talents of individuals who produce products and services. The payment to labor is called wages

Entrepreneurs combine land, labor, and capital to produce goods and services. They absorb the risk of being in business, including the risk of bankruptcy and other liabilities associated with doing business. Entrepreneurs receive profits for this effort

Includes manufactured products such as tractors, welding equipment, and computers that are used to produce other goods and services. The payment to capital is referred to as interest

One country can produce more of a good than another country

Includes natural resources such as mineral deposits, oil, natural gas, water, and land in the usual sense of the word. The payment to land as a resource is called rent

The mix of goods and services produced is just what the society desires

Goods and services are produced at their lowest resource (opportunity) cost

One country has a lower opportunity cost of producing a good than another country