Question

Styles Styles Pane Due: January 23, 2019 by 11:59 pm The following are problems from Chapter 2 1. Use the PPF from problem 1.9 (page 63, 5th Edition; page 67, 6th or 7th Editions) to answer the following questions. a. Which point(s) are efficient? What is the opportunity cost of producing more capital goods at efficient points? Briefly explain your answer. b. Which point(s) are inefficient? What is the opportunity cost of producing more consumption goods at inefficient points? Briefly explain your answer. (Hint: think carefully about the definition of opportunity cost.) c. If you want to make point E attainable as quickly as possible in the future, producing at which of the given points on the graph (A, B, C, or D) will shift the PPF out most quickly to make point E attainable? Briefly explain your answer. (Hint: producing one of the types of goods will shift out the PPF point produces the most of that type of good?) Which

Answer 1

Ans

1 points on ppf frontier B, C, D are efficient. The OPPUTUNITY cost is loss in production of consumption goods as we increase production of capital goods

2 A is inefficient because more output could be produced by using same amount of resources. The OPPUTUNITY cost is zero because we can increase capital goods production without decreasing consumption goods production

3 B because here more capital goods are produced which contain new rechnology of production