Question

Suppose France produces only trucks and cars. The resources that are used in the production of these two goods are not specialized—that is, the same set of resources is equally useful in producing both cars and trucks. The shape of France's production possibilities frontier (PPF) should reflect the fact that as France produces more cars and fewer trucks, the opportunity cost of producing each additional car_________ .

Answer 1

Answer: Remains constant

Explanation:

The resources used in the production of both the cars and the trucks are the same. The resources used to produce an additional car to the detriment of the trucks is therefore always the same.

This means that the opportunity cost of producing each additional car will be constant and will neither be increasing nor decreasing because the same quantity is always given up.

The PPF for these two goods will be a diagonal straight line to represent that the opportunity cost is constant.