Suppose an economy produces two goods, food and machines. This economy always op

Question

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?

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.

Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry.

In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies.

The technological advance reduced the amount of resources needed to produce 30 machines. These resources could be used to produce more food.

Explanation / Answer

Option D. The technological advance reduced the amount of resources needed to produce 30 machines. These resources could be used to produce more food.

Lets think about this one so that you can get the answer on you own. Let say that i have 10 fruits and 20 vegs that i can produce with 10 plots of land. Not lets that that introduced technology that makes it so i can product 10 fruits and 20 vegs with only 5 plots of land. What can i produce with 10 plots of land? Well the answer is i can double it with out giving up any thing.

This applies here. There was a change in the technology that allow one to produce more with less. In this case the resource that were saved were transferred to food production. Makes since?

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