Figure 2-7 Mercedes Benz recently decided to introduce its B-class automobile in the U.S. market, an electric car that is has designed and developed in a partnership with Tesla Motors. Assume Mercedes Benz chooses to produce both electric-engine vehicles and gasoline-engine vehicles. Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions.
-Refer to Figure 2-7. Assume a technological advancement greatly reduces the cost to produce electric-engine vehicles. This is best represented by the

Question

Figure 2-7  Mercedes Benz recently decided to introduce its B-class automobile in the U.S. market, an electric car that is has designed and developed in a partnership with Tesla Motors. Assume Mercedes Benz chooses to produce both electric-engine vehicles and gasoline-engine vehicles. Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions.
-Refer to Figure 2-7. Assume a technological advancement greatly reduces the cost to produce electric-engine vehicles. This is best represented by the

Quizplus · Accepted Answer

A technological advancement that greatly reduces the cost to produce electric-engine vehicles would shift the production possibilities frontier outwards towards the production of electric-engine vehicles, represented by the movement from E to F in Graph A. This would allow for more electric-engine vehicles to be produced at the same cost and thus increase the potential for profit from the sale of these vehicles.

Figure 2-7 Mercedes Benz Recently Decided to Introduce Its