According to my notes, the correct answer is 180. I came up with200. Could you...

According to my notes, the correct answer is 180. I came up with 200. Could you please explain why 180 is the correct answer (or maybe my notes are wrong).

The following table contains some production possibilities for an economy for a given year. If the production possibilities frontier is bowed outward, then "?" could be____________

Cakes	Pies
10	600
20	400
30	?

Expert Solution

The right answer is 200 only.

PPF refers to graphical representation of possible combinations of two goods that can be produced with given resources and technology.

PPF is based on assumption that when resources are transferred from production of one good to another, the productivity decreases.

Here when resources are transferred to from production of pies to cakes, productivity of cake decreases. In order to produce 10 cakes, 200 pies has to be sacrificed.

Therefore to increase production of cakes by 10 units, the production of pies has to be decrease by 200 units.

Cake. Pies

10. 600

20. 400

30. 200

Rahul Sunny answered 2 years ago

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