Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1,000 units of food and 47 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 1,050 units of food and 47 machines. Which of the following statements is correct?

A) Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 47.
B) Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry.
C) In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies.
D) The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.

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Faiza Ettangi · Accepted Answer

Final Answer : D, Explanation :  The technological advance in the machine-making industry means that fewer resources are needed to produce the same amount of machines (47). These freed-up resources can then be reallocated to increase food production from 1,000 to 1,050 units without reducing machine production, indicating an improvement in overall production efficiency.

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