Greta starts using a new baking technique and she can now do twice as much of ev
ID: 1248794 • 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: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
We know that her curve has shifted rightward because she can produce more of both goods. So, we can immediately eliminate c and d. A and B ask us to evaluate her opportunity cost. This can be evaluated as the ratio of the products. Here, we see that 10/8=5/4. So, her opportunity cost as not changed. A is the correct answer.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.