Figure: United States Production Possibility Frontier Suppose the figure illustrates the United States PPF for the production of corn and TVs. Which of the following statements is TRUE?
A) The United States should specialize in the production of corn, since they can produce more corn than TVs.
B) For each TV that the United States produces, it gives up 25 units of corn.
C) The United States should produce 50 TVs and 1,250 units of corn to maximize value to society.
D) The United States has the comparative advantage in the production of TVs.

Question

Figure: United States Production Possibility Frontier  Suppose the figure illustrates the United States PPF for the production of corn and TVs. Which of the following statements is TRUE?
A) The United States should specialize in the production of corn, since they can produce more corn than TVs. 
B) For each TV that the United States produces, it gives up 25 units of corn. 
C) The United States should produce 50 TVs and 1,250 units of corn to maximize value to society. 
D) The United States has the comparative advantage in the production of TVs.

Quizplus · Accepted Answer

The slope of the PPF represents the opportunity cost of producing one good in terms of the other. In this case, the slope is -25, meaning that for each TV produced, 25 units of corn must be given up. Therefore, B is the correct statement. A is incorrect because it assumes that maximizing production of one good is the goal, when in reality the goal is to maximize the value to society. C is incorrect because it assumes that there is only one possible combination of corn and TVs that maximizes value, when in reality it depends on societal preferences and market conditions. D is incorrect because the PPF does not indicate comparative advantage, which is determined by differences in opportunity costs between countries.

Figure: United States Production Possibility Frontier Suppose the Figure