Why is the shape of the production possibilities frontier (PPF) often curved instead of straight? a. The productive efficiency of an economy decreases as it moves from left to right along the PPF. b. To take a potential sunk cost into account, the PPF is curved to distribute the burden of the sunk cost based on allocative effieciency. c. Because the production possibilities frontier is based on the productive capabilites, and of a nation overall, rather than the productive capacity of an individual. d. Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.
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This law states that as the production of one good increases, the opportunity cost to produce the additional good will increase. This is best explained by option d. Typically, some resources are better suited for producing one good than another. This means that Show more…
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Lookup a Production Possibilities Frontier (PPF) graph. What role does the production possibility frontier (PPF) model have in making business decisions regarding specialization and trade?
Assume that a business firm finds that its profit is greatest when it produces $\$ 40$ worth of product A. Suppose also that each of the three techniques shown in the table to the right will produce the desired output. a. With the resource prices shown, which technique will the firm choose? Why? Will production using that technique entail profit or loss? What will be the amount of that profit or loss? Will the industry expand or contract? When will that expansion or contraction end? b. Assume now that a new technique, technique $4,$ is developed. It combincs 2 units of labor, 2 of land, 6 of capital, and 3 of entrepreneurial ability. In view of the resource prices in the table, will the firm adopt the new technique? Explain your answer. c. Suppose that an increase in the labor supply causes the price of labor to fall to $\$ 1.50$ per unit, all other resource prices remaining unchanged. Which technique will the producer now choose? Explain. d. "The market system causes the economy to conserve most in the use of resources that are particularly scarce in supply. Resources that are scarcest relative to the demand for them have the highest prices. As a result, producers use these resources as sparingly as is possible." Evaluate this statement. Does your answer to part $c$, above, bear out this contention? Explain. CAN'T COPY THE TABLE
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