Figure 2.2
-Figure 2.2 presents a production possibilities curve for a given year for a country that can either produce highways or provide people with medical care.The reason why the production possibilities curve is shaped as it is (bowed outward)is because inputs for healthcare and highways are

Question

Quizplus · Accepted Answer

The bowed-out shape of the production possibilities curve suggests that the inputs for healthcare and highways are substitutable to some extent, but not perfectly so. If they were perfectly substitutable, the curve would be a straight line, indicating that the country could easily shift all resources from one good to the other without any decrease in overall production. However, the bowed-out shape indicates that there are diminishing marginal returns to each input, meaning that the more resources the country devotes to producing one good, the less productive those resources become for producing that good, and the more productive they become for producing the other good. This suggests that the country faces a tradeoff between producing healthcare and producing highways, and that the optimal production mix will depend on the relative prices and values of these goods to the society at large.

Figure 2.2 -Figure 2.2 Presents a Production Possibilities Curve for a Given