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 is determined by the opportunity cost of producing one good (in terms of the amount of the other good forgone). The opportunity cost of producing cloth (MPLC) is the amount of food that must be given up, and similarly, the opportunity cost of producing food (MPLF) is the amount of cloth that must be given up. Therefore, the slope of the production possibility frontier is equal to -MPLF/MPLC. As more cloth is produced, the economy must sacrifice an increasing amount of food, causing the opportunity cost (MPLF) to increase. Therefore, the slope becomes steeper.

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