The slope of a country's production possibility frontier with cloth measured on the horizontal and food measured on the vertical axis in the specific factors model is equal to ________ and it ________ as more cloth is produced.

Question

Quizplus · Accepted Answer

In the specific factors model, the slope of the production possibility frontier with cloth measured on the horizontal axis and food measured on the vertical axis is equal to -MPLS1U1B1FS1U1B0/MPLS1U1B1CS1U1B0. This is because the opportunity cost of producing one unit of cloth is the amount of food that must be given up, which is equal to the marginal product of labor in food production divided by the marginal product of labor in cloth production, or MPLF/MPLC. Using the specific factors model, MPLC = S1/U1B1C and MPLF = S1/U1B1F, where S1 is the fixed amount of capital and land used in both sectors, U1B1C and U1B1F are the respective shares of labor employed in cloth and food production. Therefore, the slope of the production possibility frontier is -MPLS1U1B1F1U1B0/MPLS1U1B1C1U1B0. As more cloth is produced, the production of food must be reduced, so the slope of the production possibility frontier becomes steeper.

The Slope of a Country's Production Possibility Frontier with Cloth