Table 3-5 Assume that England and Spain can switch between producing cheese and

Question

Table 3-5 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate Labor Hours Needed to Make 1 Unit of Number of Units Produced in 40 Hours Cheese Bread 4 Cheese 40 110 10 4 Refer to Table 3-5. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for Spain. If we were to do this, measuring bread along the horizontal axis, then a. the slope of England's production possibilities frontier would be -4 and the slope of Spain's production possibilities frontier would be -2. b. the slope of England's production possibilities frontier would be 0.25 and the slope of Spain's production possibilities frontier would be 0.5. c, the slope of England's production possibilities frontier would be-0.25 and the slope of Spain's production possibilities frontier would be-05 d. the slope of England's production possibilities frontier would be 4 and the slope of Spain's production possibilities frontier would be 2.

Explanation / Answer

The slope of the PPF is called the marginal rate of transformation and it is the opportunity cost of producing 1 additional unit (measured on the horizontal axis) for the constant PPF, similar to this case. The opportunity cost of producing 1 bread loaf is 4 cheese units and the same is 2 units of cheese.

Hence the slope of PPF for England is -4 and that of Spain is -2. Option A is correct.

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