1. Specialization and production possibilities Suppose the Netherlands produces only scooters and bikes. The resources that are used in the production of these two goods are not specialized--that is, the same set of resources is equally effective at producing both bikes and scooters. The shape of the Netherlands's production possibilities frontier (PPF) should reflect the fact that as the Netherlands produces more bikes and fewer scooters, the opportunity cost of producing each additional bike The following graphs show two possible PPFs for the Netherland decreases increases remains constant ht-line PPF (PPF) and a bowed-out PPF (PPF ₂).
1. Specialization and production possibilities Suppose the Netherlands produces only scooters and bikes. The resources that are used in the production of these two goods are not specialized--that is, the same set of resources is equally effective at producing both bikes and scooters. The shape of the Netherlands's production possibilities frontier (PPF) should reflect the fact that as the Netherlands produces more bikes and fewer scooters, the opportunity cost of producing each additional bike The following graphs show two possible PPFs for the Netherland decreases increases remains constant ht-line PPF (PPF) and a bowed-out PPF (PPF ₂).
Chapter2: Productions Possibilities, Opportunity Costs, And Economic Growth
Section: Chapter Questions
Problem 6SQP
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1. Specialization and production possibilities
Suppose the Netherlands produces only scooters and bikes. The resources that are used in the production of these two goods are not specialized-that
is, the same set of resources is equally effective at producing both bikes and scooters.
The shape of the Netherlands's production possibilities frontier (PPF) should reflect the fact that as the Netherlands produces more bikes and fewer
scooters, the opportunity cost of producing each additional bike
The following graphs show two possible PPFs for the Netherland
SCOOTERS
PPF
Graph 1
The following graphs show two possible PPFS for the Netherlands's economy: a straight-line PPF (PPF) and a bowed-out PPF (PPF ₂).
BIKES
BIKES
decreases
?
increases
remains constant
ht-line PPF (PPF) and a bowed-out PPF (PPF).
SCOOTERS
PPF₂
Graph 2
BIKES
BIKES
?
Based on the previous description, the trade-off the Netherlands faces between producing bikes and scooters is best represented by
Graph 1
Graph 2
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