Question

7. Assume Steve lives as a hunter gatherer and has a production possibility frontier between fish (on the vertical axis) and apples (on the horizontal axis) that is a line with a slope of -1/2. Which of the following is true?

A. In order to gain one more fish, Steve must give up one apple.

B. The opportunity cost of acquiring one more fish is two apples.

C. The trade-off between fish and apples will be different depending on the relative abundance of one good.

D. The price for apples for Steve is two fish.

Answer 1

option B is correct

The opportunity cost of acquiring one more fish is two apples (slope = -1/2 = change in number of fish/ change in number of apples)

Answer 2

The correct answer is C. The trade-off between fish and apples will be different depending on the relative abundance of one good.

The slope of the production possibility frontier represents the opportunity cost of producing one good in terms of the other. In this case, since the slope is -1/2, it means that for every two apples Steve gives up, he can produce one more fish. This implies that the opportunity cost of acquiring one more fish is two apples (Option B is incorrect).

However, the opportunity cost and trade-off between fish and apples can vary depending on the relative abundance of one good. For example, if Steve initially has an abundance of apples, the opportunity cost of producing one more fish will be low (he will have to give up fewer apples). Conversely, if Steve initially has an abundance of fish, the opportunity cost of producing one more apple will be low (he will have to give up fewer fish). Therefore, the trade-off between fish and apples will be different depending on the relative abundance of one good (Option C is correct).

The price for apples for Steve is not necessarily two fish. The concept of price usually refers to the exchange rate between two goods in a market economy. In this scenario, the production possibility frontier represents the trade-off between fish and apples in Steve's production, not an explicit price relationship (Option D is incorrect).

Option A is incorrect because it suggests a one-to-one trade-off between fish and apples, which is not reflected in the given slope of the production possibility frontier.