Assume the following production possibilities data are for a small country off t

Question

Assume the following production possibilities data are for a small country off the coast of South America. Assume that this economy is currently at point "C A B C D E Pretzels 0 8 13 17 20 Beer 4 2 0 Suppose that for whatever reason, this country found itself with 5 pretzels and 3 beers, and that it still had the production possibilities data given above. How would this new combination of pretzels and beer be achieved? Through changes in technology. Through investment in capital. Through investment in land and labor. All of the above.

Explanation / Answer

A. Through changes in technology

Changes in technology alter the production possibility curve. To arrive at 5 pretzels and 3 beers we would have to bring a change in technology causing it to produce less from the current level of output.

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