Quizzol

QUESTION:

1. Specialization and production possibilities

Suppose Scotland produces only scooters and bikes. The resources that are used in the production of these two goods are not specialized—that is, the same set of resources is equally effective at producing both bikes and scooters.

The shape of Scotland's production possibilities frontier (PPF) should reflect the fact that as Scotland produces more bikes and fewer scooters, the opportunity cost of producing each additional bike .

The following graphs show two possible PPFs for Scotland's economy: a straight-line PPF (

{PPF}_{1}

) and a bowed-out PPF (

{PPF}_{2}

Based on the previous description, the trade-off Scotland faces between producing bikes and scooters is best represented by .

ANSWER:

ased on the previous description, the trade-off Scotland faces between producing bikes and scooters is best represented byGraph 1 Correct

Points:

1 / 1

For bowed-out PPFs, the opportunity cost of producing scooters is reflected in the curvature of the PPF. In flatter regions, producing an additional bike requires giving up fewer scooters. However, in steeper regions, producing an additional bike requires giving up more scooters. In other words, the opportunity cost of producing bikes changes as you move along the PPF.

For linear PPFs, the opportunity cost of producing bikes is constant and reflected in the slope of the PPF. If the PPF is flatter, producing an additional bike requires giving up fewer scooters. If the PPF is steeper, producing an additional bike requires giving up more scooters.

In this case, because the opportunity cost of producing additional bikes remains constant as more resources are shifted to the production of bikes, the PPF must be linear. Therefore, Graph 1 best represents the trade-off Scotland faces between producing bikes and scooters.

Posted by Cleveland on August 29, 2024