Smallville has a linear production possibility frontier in the production of good X and good Y. It can produce 6 of X per hour or 8 of Y per hour. Suppose it has 240 hours of labor and divides labor hours equally between production of good X and good Y. What is the MAXIMUM amount of good Y it can produce?
A)960
B)30
C)14
D)6

Question

Quizplus · Accepted Answer

Smallville has 240 hours of labor. If all labor is used to produce good Y, it can produce 8 units of Y per hour. Therefore, the maximum amount of good Y it can produce is 240 hours * 8 units/hour = 1920 units. However, since the question asks for the maximum amount of good Y when labor is divided equally, it would be 120 hours * 8 units/hour = 960 units.

Smallville Has a Linear Production Possibility Frontier in the Production