Answered: Suppose Japan produces only cars and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose Japan produces only cars and digital cameras. The resources that are used in the production of these two goods are specialized—that is, some inputs are more suitable for producing cars than for producing digital cameras, whereas others are more suitable for producing digital cameras than cars.

The shape of Japan’s production possibilities frontier (PPF) should reflect the fact that as Japan produces more digital cameras and fewer cars, the opportunity cost of producing each additional digital camera ________ (options: decreases, increases, remains constant).

Based on the previous description, the tradeoff Japan faces between producing digital cameras and cars is best represented by _________ (options: graph 1, graph 2).

On graphs 1 and 2, point A depicts a combination of cars and digital cameras that lies in the _________ (options: unattainable, attainable) region, and point B depicts a combination of cars and digital cameras that lies in the _______ (options: unattainable, attainable) region.

The following graphs show two possible PPFS for Japan's economy: a straight-line PPF (PPF1) and a bowed-out PPF (PPF2).
Graph 1
Graph 2
PpF 2
PPF,
メイ
DIGITAL CAMERAS
DIGITAL CAMERAS
Based on the previous description, the tradeoff Japan faces between producing digital cameras and cars is best represented by
On graphs 1 and 2, point A depicts a combination of cars and digital cameras that lies in the
region, and point B depicts a
combination of cars and digital cameras that lies in the
region.
CARS
CARS

Expert Solution

Step 1

The Production Possibility Frontier is the locus point of all the different combinations of the two goods that an economy can produce while efficiently and completely utilizing the resources as well as the factors of production of the economy. Thus, the economy can be efficient when it produces at the PPF and when the output is below the PPF, it is known that the economy is operating inefficiently. The locus point above the PPF is presently unattainable and will be attainable when the economy grows.

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