Macroeconomics
Macroeconomics
11th Edition
ISBN: 9781260506891
Author: Colander
Publisher: MCG
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Chapter 2, Problem 1QE
To determine

The shift of the production possibility curve.

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Explanation of Solution

The figure shows the production possibility curve.

Macroeconomics, Chapter 2, Problem 1QE

In the figure, the horizontal axis represents the production of widgets and the vertical axis represents production of wadgets. As a result of an increase in the production of widgets, the point that touches the X-axis will move rightward. If the production of wadgets decreases, the point that touches the Y-axis moves downward. This will create a new production possibility curve.

Economics Concept Introduction

Production possibility curve: Production possibility curve refers to the different combinations of two commodities that can be produced using the available resources and technologies fully and efficiently.

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Students have asked these similar questions
How could a country shift its production possibilities curve to the right through improved technology?
Under what circumstances in the Philippines can we operate outside the production possibilities curve? Explain your answer.
I've already read the answer provided on this site, but it is not giving me the information I need. I understand the math for finding the opportunity costs for each item in each country. However, where are they getting the answer that 2.5 tons of chemicals is what the US will give up, and 1 ton of apparel is what China will give up? From videos I've seen on youtube, they basically state that as long as the cost is less than what the original opportunity cost is, then nations will trade. So, it costs China 4 apparel for every 1 ton of chemicals, and in the US it costs 1 apparel for every 3 tons of chemicals. Am I right to assume that as long as China can trade less than 4 apparel it will benefit, and as long as the US can trade less than 3 tons of chemicals it will benefit? If so, then what is the math being used to arrive at exactly 1 ton of Chemicals for 1 ton of Apparel for China, and 1 apparel for 2.5 tons of Chemicals for the US? I need to understand the math that is used to…
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