The slope of a country's production possibility frontier is equal to ________ and the optimal production point is located where the slope is equal to ________. Assume that output of good Y is measured on the vertical axis, output of good X is measured on the horizontal axis, MPL is the marginal product of labor with a subscript indicating which good, P is the price of a good, and w is the wage rate.
A) -PX/PY; -MPLY/MPLX;
B) -MPLY/MPLX; -PX/PY
C) -MPLX/MPLY; -PX/PY
D) -MPLY/w; -MPLF/w
E) -PX/w; -PY/w

Question

Quizplus · Accepted Answer

The slope of a country's production possibility frontier (PPF) is equal to the opportunity cost of producing one good over another, which is represented by the ratio of the marginal products of labor for the two goods (-MPLY/MPLX). The optimal production point, where the country maximizes its economic efficiency, is where the slope of the PPF is equal to the ratio of the prices of the two goods (-PX/PY), indicating that the value of the marginal product of labor is equalized across industries.

The Slope of a Country's Production Possibility Frontier Is Equal