Question

On the basis of the following production possibilities tables for two countries, North Cantina and South Cantina.

Answer 1

Answer:

A

Explanation:

The Production possibilities frontiers is a curve that shows the various combination of two goods a company can produce when all its resources are fully utilised.  

The PPC is concave to the origin. This means that as more quantities of a product is produced, the fewer resources it has available to produce another good. As a result, less of the other product would be produced. So, the opportunity cost of producing a good increase as more and more of that good is produced.  

To determine which country has a better technology in production, the opportunity cost has to be calculated. The country with the lower opportunity cost has the better technology

At point B for North Cantina:

The opportunity  cost of producing one 4 units of capital good = 10/4 = 2.5 units of consumer goods

The opportunity  cost of producing 10 units of consumer good = 4/10 = 0.4 units of capital goods

At point B for South Cantina

The opportunity  cost of producing one 4 units of capital good = 8/4 = 2units of consumer goods

The opportunity  cost of producing 8 units of consumer good = 4/8 = 0.5 units of capital goods

South Cantina has a lower opportunity cost in the production of capital goods while North Cantina has a lower opportunity cost in the production of consumer goods