Germany Production Possibilities (Production Alternatives)ProductABCDEFAutos048121620Chemicals4032241680 U.S. Production Possibilities (Production Alternatives)ProductABCDEFAutos03691215Chemicals60483624120 The data in the accompanying production possibilities tables (in millions of units) suggest that production in Multiple Choice Germany is subject to increasing opportunity costs and in the United States to constant opportunity costs. the United States is subject to increasing opportunity costs and in Germany to constant opportunity costs. both Germany and the United States is subject to constant opportunity costs. both Germany and the United States is subject to increasing opportunity costs.

Production possibilities shows us the various combination of goods (here, autos and chemicals) which can be made with given resources and technology in a nation. Its slope tells us how much amount of one good (say, autos) needs to be dropped off to make additional units of other good (say, chemicals). For country G: ∆chemicals∆autos=32-404-0=-2 For country U: ∆chemicals∆autos=48-603-0=-4 Here, the negative sign shows the negative slope as to make more of a good, some units of other good has to be given up. A). the opportunity cost at all levels is not rising for country G, hence option A is incorrect. B). the opportunity cost at all levels is not rising for country U, hence option B is incorrect. C). In country G, for making extra 4 units of autos (∆autos), the country has to give up the production of 8 units of chemicals (∆chemicals), which can be observed at all points A, B, C, D, E, and F. This symbolizes that the opportunity cost of producing each autos is 2 units of chemicals. For country U, every additional 3 units of auto production (∆autos), it has to drop off on 12 units of chemicals production (∆chemicals), which remains constant for all levels of production. This symbolizes that for every unit of auto production US has to drop off on 4 units of chemical production. Hence option C is correct as in both the nations, the opportunity cost remains constant. D). option D is incorrect as both face constant opportunity costs.

Answered: Germany Production Possibilities…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

	Germany Production Possibilities
	(Production Alternatives)
Product	A	B	C	D	E	F
Autos	0	4	8	12	16	20
Chemicals	40	32	24	16	8	0

	U.S. Production Possibilities
	(Production Alternatives)
Product	A	B	C	D	E	F
Autos	0	3	6	9	12	15
Chemicals	60	48	36	24	12	0

The data in the accompanying production possibilities tables (in millions of units) suggest that production in

Multiple Choice

Germany is subject to increasing opportunity costs and in the United States to constant opportunity costs.
the United States is subject to increasing opportunity costs and in Germany to constant opportunity costs.
both Germany and the United States is subject to constant opportunity costs.
both Germany and the United States is subject to increasing opportunity costs.

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