Question

Consider figure 1.1 below and answer questions 1 - 6 below. This refers to production of flowers/ apples on a piece of land that Mike owns. Assume that Mike is currently on PPFi 1200 1000 800 600 400 200 PPF 1 PPF3 200 400 Flowers (lbs/ day) Figure 1.1 Is it possible for Mike to produce 300 lbs of flowers and 750 lbs of apples per day? (PPF 1) no data insufficient Why/how could Mike move from PPF 1 to PPF 2? Improvement in technology for production of apples a recession III high price of flowers IV Discovery of new fertilizer for flowering plants I only II only III only d. IV only Now that Mike moves to PPF 2 and produces only flowers. He contemplates on producing some apples. What is the opportunity cost of producing the first 450 lbs of apples per day? 1oo0 lbs of apples per day b. 400 lbs of flowers per day d. 1o0 lbs of flowers per day 75 lbs of apples per day If Mike moves to PPF 3 from PPF 1, what could be the reason that made Mike make this move? Improvement in technology for production of apples a recession III high price of flowers IV Discovery of new fertilizer for flowering plants I & III only II only I & IV only d. III & IV only Mike is producing 300 lbs of flowers and 500 lbs of apples per day and he is on PPF 3. Why? Improvement in technology for production of apples a recession III high price of flowers IV Discovery of new fertilizer for flowering plants I & III only II only I & IV only d. III & IV only

Answer 1

Ans.1- (B)

This point will lie outside of his PPF1 .

Ans.2 - (D)

If new fertilizer for flowering plant is discovered then higher no. of flowers can be produced and hence MIKE moves from PPF1 to PPF2.

Ans.3- (C)

Observe this point on PPF2 to find this answer.

Ans.4- (C)

If new fertilizer for flowering plant is discovered then higher no. of flowers can be produced and if there is improvement in production of apples then more apples can be produced .Hence MIKE moves from PPF1 to PPF3.

Ans.5- (B)

If there is recession,then there will be low demand and hence he will produce lower than the amount that he can.

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