If a linear, two-good production possibilities curve has a slope of ‒2, then:
A)having an additional unit of the good measured on the vertical axis means giving up 2 units of the good measured on the horizontal axis.
B)having an additional unit of the good measured on the vertical axis means giving up ½ of a unit of the good measured on the horizontal axis.
C)you have an absolute advantage in the good measured on the vertical axis.
D)you have a comparative advantage in the good measured on the vertical axis.

Question

Quizplus · Accepted Answer

The absolute value of the slope of the production possibilities curve gives you the opportunity cost of the good measured on the horizontal axis, and the reciprocal of the absolute value of the slope of the production possibilities curve gives you the opportunity cost the good measured on the vertical axis.

If a Linear, Two-Good Production Possibilities Curve Has a Slope