Figure 3-2
Peru's Production Possibilities Frontier

-Refer to Figure 3-2.The fact that the line slopes downward reflects the fact that
A) for Peru, it is more costly to produce emeralds than it is to produce rubies.
B) Peru will produce more emeralds and fewer rubies as time goes by.
C) Peru faces a tradeoff between producing emeralds and producing rubies.
D) Peru should specialize in producing rubies.

Question

Figure 3-2
Peru's Production Possibilities Frontier
 
-Refer to Figure 3-2.The fact that the line slopes downward reflects the fact that
A) for Peru, it is more costly to produce emeralds than it is to produce rubies. 
B) Peru will produce more emeralds and fewer rubies as time goes by. 
C) Peru faces a tradeoff between producing emeralds and producing rubies. 
D) Peru should specialize in producing rubies.

Quizplus · Accepted Answer

The downward-sloping production possibilities frontier (PPF) in Figure 3-2 reflects the fact that Peru faces a tradeoff between producing two goods: emeralds and rubies. The opportunity cost of producing more emeralds is giving up some production of rubies, as reflected by the negative slope of the PPF. Therefore, C is the correct answer. A is not true because the PPF does not indicate which good is more costly to produce; it only shows the tradeoff between the two goods. B is incorrect because the PPF does not show any changes over time. D is not a valid inference from the graph.

Figure 3-2 Peru's Production Possibilities Frontier