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 that in response to changing consumer demands, Mercedes cuts back on the production of electric vehicles and increased its production of gasoline-powered vehicles. This strategy 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 that in response to changing consumer demands, Mercedes cuts back on the production of electric vehicles and increased its production of gasoline-powered vehicles. This strategy is best represented by the

Quizplus · Accepted Answer

The movement from point J to point H in Graph B represents the decision to cut back on electric vehicle production and increase gasoline vehicle production. This is because the slope of the production possibilities frontier at point J is steeper for electric vehicles than for gasoline vehicles, meaning that giving up some electric vehicle production for additional gasoline vehicle production results in a smaller opportunity cost (i.e. fewer electric vehicles foregone). Moving to point H allows Mercedes Benz to increase overall production of gasoline vehicles while minimizing the loss of electric vehicle production.

Figure 2-7 Mercedes Benz Recently Decided to Introduce Its