Figure 19-3 illustrates the determination of an efficient output mix in a two good economy.The output combination is represented by point Z and the consumption point of a representative consumer is W.The slope of the line zz represents the marginal rate of transformation [MRT]. In Figure 19-3,at point Z: A)the MRT_XYis greater than the MRS_XY. B)the opportunity cost of producing an additional unit of good X equals 2 units of good Y. C)the resources in the economy are being used inefficiently. D)the slope of the production possibility frontier is greater than the slope of the line zz.

Question

Quizplus · Accepted Answer

At point Z, the slope of the production possibility frontier (PPT) is equal to the slope of the line zz, which represents the marginal rate of transformation (MRT). This indicates that resources are being used efficiently to produce the output mix represented by point Z. The opportunity cost of producing an additional unit of good X is equal to the MRT, which can be read as the ratio of the units of good Y that must be given up in order to produce an additional unit of good X. Therefore, at point Z, the opportunity cost of producing an additional unit of good X equals 2 units of good Y, as shown by the slope of the line zz.

Figure 19-3 Illustrates the Determination of an Efficient Output Mix