Another graph, another idea that we want to use to illustrate the principles of free-trade. Is something called the production possibilities curve. You may have encountered this in another economics course. And we're going to draw it for two goods which may seem a little silly but anyway this was the classic trade-off. In this case, were going to use guns and butter. This was the trade-off that economists like to use to illustrate the cost of war for instance. So anyway, the production possibilities curve tells you how much, what the maximum amount a country is capable of producing of any two given goods. We have just always, just two goods in the curve. And it shows what would happen if they produce more of one, they have to give up some of the other, okay? Now I'm going to draw this in the simplest possible way which is to make it just a straight line. You may have studied it looking a little differently. But in this trade section, we're going to use a straight line. So the curve might look like this, okay? And what that curve tells us is that, given my resources, my land, my labor, my minerals, my machinery, whatever I have. I'm capable of producing certain amounts of guns and certain amounts of butter, okay? I could produce all guns, okay? And no butter whatsoever, okay? So this is a zero at the Axis. I could produce all butter and no guns whatsoever, okay? Or I could produce some combination of the two and all those combinations are marked along this line, okay? So I get to have this many guns and that much butter or this many guns and that much better or anything in between. Obviously one of the things we're showing that we're not going to talk about much today is. When I want to produce more guns, I have to give up butter and that's why this is used. A country goes to war, It will have less butter because it has limited resources and has to give up some civilian goods to get its military goods. In this particular course, we're going to say, a country has two goods that it can produce. It might choose one production spot when it's not trading. It might choose another one when it is trading. But what I want you to remember, before we move into the model is that, this is an absolute outer limit for the country. Given their resources, they can produce any of these possibilities but they can never be out here because their resources do not allow them to produce more than the amount that's marked by this curve. That's why we call the production possibilities curve or production possibilities frontier, okay? It marks the outer limits of our possible production.