Quizzol

QUESTION:

Suppose the fictional country of Yellowstone produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for rice, an agricultural good, and electric generators, a capital good.

Drag the production possibilities frontier (PPF) on the graph to show the effects of a time-saving innovation in the manufacturing of electric generators.

Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.

ANSWER:

Points:

1 / 1

Because of the innovation in capital goods production, more electric generators can be produced using the same amount of resources; however, there is no reason to think that the maximum amount of rice that can be produced would change.

For instance, when you look at the vertical axis, you see that if Yellowstone produces zero bushels of rice, it can initially produce a maximum of 210,000 electric generators per year. Because the innovation in capital goods production increases the number of electric generators Yellowstone can produce, you should have moved the point to 280,000 electric generators per year.

Similarly, when you look at the horizontal axis, you see that if Yellowstone produces zero electric generators, it can initially produce a maximum of 120 million bushels of rice per year. Because the innovation in capital goods production does not affect the amount of rice Yellowstone can produce, you should have left the point at 120 million bushels of rice per year.

Posted by Cleveland on August 29, 2024