When Tesla is producing efficiently (along the PPF), they face a tradeoff known as opportunity cost.
According to the graph below, their opportunity cost of producing a Model 3 is:
Quantity of
Model Ss
produced per
day
80 A
A combination that
is unattainable with
current resources
B
60
40
F
30
20
C
G
D
Tesla's production
possibilities frontier
shows its trade-off
between producing
its original models
and its new model
A-E are all efficient and represent
possible combinations of Model S
and Model 3 production
E
0
10
20
40
50
60
80
A combination that is
inefficient because not all
resources are being used
Quantity of
Model 3s
produced per
day
