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before we go to the concept of production possibilities frontier we must understand the concept of contract curve in the case of firm behavior so well do so on our regular graph here we still have the two companies clothing and food that employ capital and labor to produce their goods now suppose that we still have a 50 units of clothing in the economy and a hundred units of Labor now recall from the previous video that we have the concept of Pareto optimality meaning that if firms are free in the market to operate then they are going to exchange labor and capital in such a way to increase their own production and theyre gonna do so until they cannot do it any more so theyre gonna literally maximize their own production in other words were interested in the points of this Pareto optimality were interested in the point were the indifference curves between the companies are gonna be tangent to each other so that in that case we want to know how much goods we have in the economy that