Question

Consider a PPF which illustrates the trade-off between tangible goods and intangible services.

If technological improvements raise productivity in the tangible good sector but not in the intangible service sector,

A-The opportunity cost of intangible services goes up.

B-The opportunity cost of tangible goods goes up. C-The opportunity cost of the two goods does not change

Suppose that different ways of organizing a society produce different levels of income for two different groups of citizens, natives and newbies. Both groups are equal in size. Scenario Native Newbies 1 8 6 2 10 7 3 12 6 4 13 3 5 11 1 6 10 0 Set up a PPF diagram with the income of the natives on the horizontal axis, the income of the newbies on the vertical axis. Treat each scenario as a point on the PPF and graph the PPF. You should end up with a strange looking PPF. A-If it isn't possible to travel any further to the north (up) then we'vereached the most efficient outcome. B-When the PPF is upward sloping, we're able to increase income for both groups at the same time. So it can't be efficient to stay on a portion of the PPF that is upward sloping. C-If it isn't possible to travel any further to the east (right) then we've reached the most efficient outcome Suppose that different ways of organizing a society produce different levels of income for two different groups of citizens, natives and newbies. Both groups are equal in size. Scenario Natives Newbies 1 8 6 2 10 7 3 12 6 4 12 3 5 11 1 Scenario ________ is likely to be most appealing to someone who is interested in minimizing poverty. Scenario _________ is likely to be most appealing to someone who is interested in minimizing inequality. A-2; 1 B-1; 2 C-3; 2

Answer 1

1. If technological improvements raise productivity in the tangible good sector but not in the intangible service sector,

Ans –

B-The opportunity cost of tangible goods goes up.

2.

this would be the ppf wih income of natives on the horizontal axis and of the newies on the vertical axis. the diiiferent points on the graph shows different scenarios.

3. B-When the PPF is upward sloping, we're able to increase income for both groups at the same time. So it can't be efficient to stay on a portion of the PPF that is upward sloping.

4. in the new scenario given

Scenario 3 is likely to be most appealing to someone who is interested in minimizing poverty. Scenario 2 is likely to be most appealing to someone who is interested in minimizing inequality.

Expl – for minimizing poverty maximum income is desired – scenario 3 gives maximum income. For minimizing inequality the differenc of icome between the twogroups should be minimum – scenario 2 gives this.