Chapter 2: Problem 9

Along a production possibilities curve, an increase in the production of one good can be accomplished only by a. decreasing the production of another good. b. increasing the production of another good. c. holding constant the production of another good. d. producing at a point on a corner of the curve.

Short Answer

Expert verified

Option A is correct. Along a production possibilities curve, an increase in the production of one good can be accomplished only by decreasing the production of another good. This is because resources are limited and fully employed, so reallocating resources for one good would reduce resources for another, reflecting the concept of opportunity cost.

Step by step solution

Understanding the Production Possibilities Curve (PPC)

The production possibilities curve reflects the principle of opportunity cost, and shows the trade-offs that an economy faces when producing two goods or services. The curve is generally convex (bowed outwards) due to the law of increasing opportunity cost, which states that as we produce more of one good, the opportunity cost of producing that good in terms of the other good rises.

Analyzing Option A: Decreasing the production of another good

If we increase the production of one good, we must decrease the production of the other good. This is because assuming full employment of resources, there are no idle resources that could be used to produce additional units of one good without affecting the production of the other. In other words, to produce more of one good, some resources must be taken away from the production of the other good, resulting in a decrease in the production of that good. This reflects the concept of opportunity cost.

Analyzing Option B: Increasing the production of another good

Increasing the production of one good and another good at the same time is not possible along the production possibilities curve. This is because the PPC assumes that resources are fully employed and fixed in amount, so allocating more resources for one product would result in taking resources from the other product.

Analyzing Option C: Holding constant the production of another good

Holding constant the production of another good while increasing the production of one good would not be possible along the PPC, considering that all resources are fully employed. In order to increase production of one good, resources must be reallocated from the production of the other good.

Analyzing Option D: Producing at a point on a corner of the curve

Producing at a point on a corner of the curve suggests that all resources are allocated to the production of one good while none are allocated to the other. In this case, increasing the production of one good without affecting the production of the other one is not applicable, as the other good is already not being produced.

Choosing the correct answer

Based on our analysis, option A is the correct answer. Along a production possibilities curve, an increase in the production of one good can be accomplished only by decreasing the production of another good. This reflects the concept of opportunity cost, and the fact that resources are limited and fully employed.