Question

What is the likely result when a technological change doubles an economy's ability to produce good X and triples the economy's ability to produce Y?

a. The economy will tend to produce less X and more Y than before.

b. The opportunity cost of producing units of Y in terms of X forgone will tend to fall.

c. The production possibilities curve will shift out further along the X-axis than along the Y-axis.

d. The economy will tend to demand more X and less Y than before

Answer 1

A technological change has doubled as economy's ability to produce good X and triples the economy's ability to produce good Y.

The slope of the production possibilities curve indicates the opportunity cost of production of two goods.

For instance,

Opportunity cost of producing good Y = Quantity produced of good X/Quantity produced of good Y

Now, production of X has doubled while production of Y has tripled.

This means denominator will increase is greater terms than numerator.

This results in decrease in the value of fraction.

So, opportunity cost of producing Y will decrease.

Thus,

It can be stated that the opportunity cost of producing units of Y in terms of X foregone will tend to fall.

Hence, the correct answer is the option (b).