Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 50 units of food and 30 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 55 units of food and 30 machines. Which of the following statements is true? a Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 30. b In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies. c Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry. d The technological advance reduced the amount of resources needed to produce 30 machines. These resources could be used to produce more food.

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Business

Maddox Hamilton

4 March, 18:05

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 50 units of food and 30 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 55 units of food and 30 machines. Which of the following statements is true? a Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 30. b In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies. c Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry. d The technological advance reduced the amount of resources needed to produce 30 machines. These resources could be used to produce more food.

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Answers (1)

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Troy Park · Answer 1

The correct answer is option d.

Explanation:

Suppose an economy always produces on its production possibilities frontier.

Last year it was producing 50 units of food and 30 machines.

This year the economy experiences a technological advancement in the machine-building industry.

The society this year wants to produce 55 units of food and 30 machines.

Technological advancement implies that more output can be produced using the same level of resources or same level of output require fewer resources.

Since society wants to produce the same level of machines it will need fewer resources to do so. The excessive resources left can be used to produce 55 units of food.