Question:
The diagram below shows production possibilities frontier for an economy producing at point A. What is the quantity of good X given up to produce the quantity of good Y?
(1) 100.
(2) 200.
(3) 300.
(4) 400.
(5) 500.
Correct Answer:
(2)
Answer Explanation:
Based on the graph’s axes, if the economy dedicated all resources to Good X, it could produce a maximum of 300 units (the x-intercept). At point A, the economy chooses to produce 800 units of Good Y, but can now only produce 100 units of Good X. The opportunity cost is the sacrificed amount: 300 – 100 = 200 units of Good X.
Topic: PPC Year: 2019
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