What is the maximum amount of food this economy can produce? How much clothing c

Question

What is the maximum amount of food this economy can produce? How much clothing can it produce at this point? If the economy it producing at alternative C. what u the cost of one more unit of food? The slope of the PPC curve represents the law of Suppose the economy is currently producing 4 units of food and 16 units of closing. Is this economy producing inefficiently. True or False If there is an increase in technology, human capital and resource availability in the long run the PPC curve will shift inward, outward, remain the same) If there is a severe recession. the production point will be on the original, inside the original curve, on a curve that shifted to the left, outside of the original curve) If the closed economy assumption is dropped from the analysis and the nation begins to trade nation will be able to (produce more, consume more, have no impact on consumption or production)

Explanation / Answer

(11) Maximum amount of food = 16 (alternative E)

(12) When food = 16, clothing = 0 (alternative E)

(13) For alternative C, cost of one more unit of food = (8 - 4) / (18 - 14) = 4 / 4 = 1 unit of clothing

(14) Slope of PPC represents the law of Increasing opportunity costs.

(15) True.

When Food = 4 (alternative B), maximum 18 units of clothing can be produced. So by producing 16 units of clothing, economy is operating inefficiently.

(16) PPC will shift outward (since more of both good can be produced).

(17) Inside the original curve

(18) Consume more

In presence of trade, an economy is able to cosnume more compared to the closed-economy consumption.

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