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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers’ preferences, it would

a. expand the production possibilities frontier.

b. contract the production possibilities frontier.

c. move the economy along the production possibilities frontier.

d. move the economy inside the production possibilities frontier.

To determine

Change in preference and production possibility frontier.

Explanation

Option (c)

Change in preferences will move the economy along the production possibility frontier, since hotdogs is more preferred in these days, resources will be more utilized in its production than hamburgers. So with the given resources and technology, there will be a trade-off between hamburgers and hot dogs, in which more hamburgers will be traded off for production of hotdogs. Thus, option ‘c’ is correct.

Option (a)

Only advancement in technology or expansion in resources expands the production possibility frontier...

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