Question

Return to the example in . Suppose there is an improvement in medical technology that enables more healthcare with the same amount of resources. How would this affect the production possibilities curve, and in particular, how would it affect the opportunity cost of education?

a) The production possibilities curve will shift outward; the opportunity cost of education will decrease.

b) The production possibilities curve will shift inward; the opportunity cost of education will increase.

c) The production possibilities curve will remain unchanged; the opportunity cost of education will remain constant.

d) The production possibilities curve will become steeper; the opportunity cost of education will increase.

Answer 1

With the improvement in medical technology allowing for more healthcare with the same resources, the production possibilities curve shifts outward and the opportunity cost of education decreases because less healthcare needs to be sacrificed to produce more education.

Step-by-step explanation:

If there is an improvement in medical technology that enables more healthcare with the same amount of resources, the production possibilities curve (PPC) will shift outward. This outward shift represents an increase in the productive capacity of the economy. Specifically, society can now produce more healthcare without sacrificing the production of other goods, such as education. Therefore, the opportunity cost of education will decrease because society doesn't have to give up as much healthcare to produce more education.

In the scenario presented where the PPC shifts outward due to technological advancement in healthcare, the correct answer is: a) The production possibilities curve will shift outward; the opportunity cost of education will decrease.