Question

Josel owns three fields: Blue field, Green field, and Red field. He produces corn and wheat. Blue field has 100 acres whereas Green field and Red field each have 80 acres. In Blue field, it takes 2 acres to produce one bushel of corn and 1 acre to produce one bushel of wheat. In Green field and Red field, it takes 4 acres to produce one bushel of corn and 5 acres to produce one bushel of wheat. Suppose that the government imposes a quantity restriction of 50 bushels of wheat on Blue field. That is, Blue field is allowed to produce at most 50 bushels of wheat. Sketch the joint PPF taking account of the quantity restriction. Clearly label your graph.

Answer 1

Josel have 3 fields- Blue, Green and Red. He produces 2 goods - corn and wheat. Consider Blue field first Total land area = 100 acres In 2 acres = 1 bushels of corn produce In 1 acres = 1 bushels of wheat produce If all land area allocates to produce corn, then 2 acres produce = 1 bushel of corn 100 acres produce = 50 bushels of corn If all land area allocates to produce wheat, then 1 acres produce = 1 bushel of wheat 100 acres produce = 100 bushels of wheat Since govt imposed restriction of 50 bushels of wheat on blue farms only, the maximum quantity of wheat produced on 100 acres of land is 50 bushels of wheat. Thus, Josel on Blue field can produce either 50 bushels of corn or 50 bushels of wheat. Consider Green field and Red field Total land area = 80 acres In 4 acres = 1 bushels of corn produce In 5 acres = 1 bushels of wheat produce If all land area allocates to produce corn, then 4 acres produce = 1 bushel of corn 80 acres produce = (1/4)*80 = 20 bushels of corn If all land area allocates to produce wheat, then 5 acres produce = 1 bushel of wheat 80 acres produce = 16 bushels of wheat

Thus, Josel on Green and Red fields can produce either 20 bushels of corn or 16 bushels of wheat. The PPF is shown below: Corn 50 Blue field Green and red field 16 50 Wheat The PPF for green and red field is same because both filed have same total area of land and also require same proportion of land to produce corn and wheat.