microeconomics

cyrus

2008-09-03 11:45 am

a president of usa promises to produce more defense goods without decreases in the production of other goods at the same time, under which following condition will the promise become valid?

a. us is producing at a point on the production possibility frontier
b. us is producing at a point inside the ppf
c. us is producing at a point beyond the ppf
d. none of the above
e. trick question

回答 (1)

mKatie

2008-09-03 10:53 pm

✔ 最佳答案

B.
PPF shows the different combination of goods that can be produced subject to the limited resources. A country cannot produce beyond the ppf unless she has more resources. Moving along the PPF means the trade-off between producing different goods, i.e. how much of good A need to be given up to produce an extra unit of good B. Therefore, if a country can produce more of a good (defense goods in this case) without producing less of another good, she must be producing inside the ppf at the beginning.

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