Greta starts using a new baking technique and she can now do twice as much of ev
ID: 1248786 • Letter: G
Question
Greta starts using a new baking technique and she can now do twice as much of everything—in a single day Greta can now make 10 cakes or 8 pies, rather than the 5 cakes and 4 pies she could previously bake. We now know that Greta's production possibility frontier:Choose one answer.
a. has shifted right, but her opportunity costs of making pies are unchanged.
b. has shifted right, but her opportunity costs of making pies have decreased.
c. has not changed, but her opportunity costs of making pies have increased.
d. has not changed, but her opportunity costs of making pies have decreased.
Explanation / Answer
**No need to be rude, I was told to give hints but not exact answers, sorry if that is not what you wanted, I would say that the answer is A Remember that the production possibility frontier is a graphical representation of the possible combinations of goods that could be produced. Before, the curve represented her slower technique, now she can produce twice as much of everything which means that her production possibility has increased, or in terms of the graph has shifted right. Now concerning her opportunity cost, you need to calculate how much cake she had to give up to make one pie (and vice versa) and compare this to how much cake she now has to give up to make one pie (and vice versa) while the overall number she can produce has increased, it is the relative efficiency with which the cake or pie production may (or may not) have changed that would alter her opportunity cost. In this case, before to bake one cake she would give up 4/5 of a pie (as calculated by finding the ratio of cakes to pies possible), now she would have to give up 8/10 of a pie to make a cake which simplifies to 4/5 indicating that even though the total amount she can produce has gone up, the relative efficiency of producing either good has not changed so her opportunity cost has not changed **No need to be rude, I was told to give hints but not exact answers, sorry if that is not what you wanted, I would say that the answer is
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