Answer to Question #255388 in Microeconomics for seme

Question

Question No. 6

 

The first principle of economics discussed in Chapter 1 is that people face tradeoffs. Use a production possibilities frontier to illustrate society’s tradeoff between a clean environment and high incomes. What do you suppose determines the shape and position of the frontier? Show what happens to the frontier if engineers develop an automobile engine with almost no emissions.

Answer 1

The shape and location of the boundary are influenced by two factors. The largest amount of output for each "good" that the civilization can possibly create determines the position of the border. The form of the frontier is defined by the opportunity cost of a clean environment in terms of the quantity of industrial output.

What happens to the Frontier when the engineers developed a new way of producing electricity that emits lesser pollutants is that Gains in environmental productivity, such as the development of new way to produce electricity that emits fewer pollutants, lead to shifts of the production-possibilities frontier.