The red PPF shows current practice, which disregards the question of sustainability. Even though sustainability is not part of the red PPF, those points are "efficient" in the sense that all resources dedicated to hunting are fully employed. The red PPF is a short run, myopically efficient set of hunting combinations.
The blue PPF shows the sustainable harvest combinations, given the stock of animals, stock of habitat, labor inputs, and hunting technolgy/knowledge. A point on the blue PPF is a sustainably, economically efficient combination of ground and arboreal animals harvested. The blue PPF is a long run curve, meaning that the myopia problem has been solved.
A combination inside the blue curve is a sustainable combination, but it is not long run efficient. A combination between the two curves is a myopic choice, since that harvest rate is not sustainable. In addition, it is not even efficient in the myopic short run.
In this figure only the myopic PPF is shown. The solid blue line is the isorevenue curve for the hunting industry. Given resources, prices and technolgy, the efficient choice is at the green dot. However, suppose that hunters have harvested the combination at the magenta dot. How do we measure the inefficiency of choosing the magenta dot instead of the green dot?
Given the magenta harvest, if hunters were to increase production of ground and arboreal animals at a constant proportion then they would expand along the cyan ray from the origin to the black point. Any point along the red PPF below the black point would generate less revenue. Any point on the red curve above the black point would generate more revenue, but it would also move hunters toward the optimal choice of ground and arboreal animals. Therefore choosing a point above the black harvest involves eliminating unemployment of resources and some part of the loss due to changing the allocation between ground and arboreal animals. For our purposes we don't want to mix the two sources of inefficiency.
Note that the choice of the black point is not the shortest distance from the magenta choice to the PPF. The shortest distance point would be the least squares projection of the magenta point onto a line tangent to the red PPF. This point would lie below the black point, and would hence not be desirable from the hunters' perspective.
In the figure the price of a ground animal is 4 and the price of an arboreal animal is 1. The revenue generated from the magenta harvest is 4*3+7 = 19. The revenue generated from the black harvest is 4*3.6043+8.41 = 22.827. The revenue generated from the green harvest is 4*2 + 20.8 = 32.8. From these revenues the value of inefficiency due to unemplyed resources, or technical inefficiency is 3.827. The loss in value due to the misallocation between ground and arboreal animals is 32.8 - 22.827= 9.973.
In the next figure we take up the inefficiency due to hunting at an unsustainable rate.
In this figure hunters again bring in the harvest at the magenta point. This is a sustainable harvest, but it is not efficient. Given prices, animal stocks, habitat and technology, they should have brought in the combination at the green diamond. The green diamond would result in greater sustainable revenue for the hunters. The green diamond results in a long run gain over either the myopic black combination or the optimal myopic green dot combination. We can calculate these gains and losses.
