Figure 3-5

-Refer to Figure 3-5.Merve should specialize in the production of
A) purses.
B) wallets.
C) both goods.
D) neither good.

Question

Figure 3-5
 
-Refer to Figure 3-5.Merve should specialize in the production of
A) purses. 
B) wallets. 
C) both goods. 
D) neither good.

Quizplus · Accepted Answer

According to the production possibilities frontier in the figure, Merve can produce either purses or wallets. The slope of the PPF represents the opportunity cost of producing an additional unit of a good. The slope of the PPF for purses is steeper than that of wallets, which means that producing an additional unit of purses requires giving up more units of wallets. This implies that Merve should specialize in producing wallets, as the opportunity cost of producing wallets is lower than that of producing purses.

Figure 3-5 -Refer to Figure 3-5.Merve Should Specialize in the Production of in the Production