S.
Klepper, Economics 73-100, Fall
2009
The
technological change increases the maximum amount of clothing that can be
produced but has no impact on the maximum amount of food that can be
produced. If the maximum amount of
clothing that could be produced before the technological change was say 200
units, then only half as much labor will be required to produce the 200 units
of clothing after the technological change.
If the remaining half of the labor force was also devoted to the
production of clothing, the amount of clothing would increase but to less than
400 units because each additional unit of clothing requires more labor to
produce than the prior unit of clothing.
Consequently, the maximum amount of clothing that could be produced will
not double.
The
technological change reduces the amount of labor required to produce each unit
of clothing by 50%. Consequently, to
produce any unit of clothing, only half as much labor needs to be transferred
from food production after the technological change than before it. Since each unit of food requires the same one
unit of labor, the opportunity cost of each unit of clothing that could be
produced before the technological change then declines by 50% as a result of
the technological change. The
technological change will also generally affect the opportunity cost of each
unit of food. This can be most clearly
seen regarding the last unit of food production. Producing this last unit of food requires the
same amount of labor, one unit, before and after the technological change. However, the one unit of labor that needs to
be transferred from clothing to food will produce more units of clothing after
the technological change than before it.
Therefore, the opportunity cost of the last unit of food produced will
rise, and in general the opportunity cost of each unit of food will be affected
by the technological change.
Before
the technological change, both food and clothing were subject to increasing
opportunity cost. Each additional unit
of clothing required more units of labor to produce than the prior unit of
clothing. Since each unit of labor
produced the same amount of food, as more units of labor were transferred from
food to clothing to increase the production of clothing by one unit, the
sacrifice in terms of food production increased. The same reasoning also applies to food—as
the same amount of labor was transferred from clothing to food to increase the
amount of food produced by one unit, the labor was more productive in the production
of clothing and the sacrifice involved in terms of the reduction in the number
of units of clothing produced increased.
The same logic applies after the technological change as before. Consequently, both before and after the
technological change the country’s production possibilities curve is
concave-shaped.
Based
on this description, the answers to the individual questions are:
_____1. False
_____2. False
_____3. True
_____4. True
_____5. True