Question

Consider the following production possibilities frontier model for an economy that produces only two goods: corn and smartphones. 0 20 40 60 80 100 100 80 60 40 20 0 SMARTPHONES (Millions) CORN (Millions of bushels) PPF Which of the following is true regarding this economic model? The fact that there are only two goods produced in this theoretical economy is a simplifying assumption that still allows economists to demonstrate key economic concepts. This PPF is not an economic model. The fact that there are only two goods produced in this theoretical economy, when, in reality, economies produce many more types of goods, means this model is generally useless. In order to construct such a model, an economist would need real life data regarding countries that only produce two goods.

Answer 1

The fact that there are only two goods produced in this theoretical economy is a simplifying assumption that still allows economists to demonstrate key economic concepts.

Step-by-step explanation:

PPF model the production possibility frontier states that two types of goods can be produced, at any given time of production, and for certain resources provided.

This clearly states the thought and simplifies the understanding of economy, based on two products to be produced from same restricted resources.

Though, the results of this curve are applicable to real world goods, where the nature and number of goods both are complex.

Therefore, the correct statement is:

As stated in answer.