Question

Saved Help Save & Exit Submit Check my work The data in the table below are for the small country of Xanadu. Assume that the economy is originallly producing combination C. D 18 E 20 Capital Goods Capital Goods 2 Consumer Goods ABC 0 10 14 0 11 125 100 75 50 25 0 a. A technological change occurs that enables Xanadu to produce 40% more units of capital goods. Complete the row Capital Goods 2, in the table above, given this technological change. Enter your responses, both above and below, rounded to 1 decimal place. b. Assuming the economy wants to continue with the same quantity of consumer goods, it can have more capital goods as a result of the technological improvement. C. Assuming the economy wants to continue with the same quantity of capital goods, it can have more consumer goods as a result of the technological improvement. d. Before the technological change, the opportunity cost of the first 100 consumer goods was Click to select) e. After the technological change, the opportunity cost of the first 100 consumer goods is Click to select) < Prey. 9 of 10 !!! Next >

Answer 1

(a)

Technological change will enable the Xanadu to produce 40% more units of capital goods.

So, this technological change only impacts production of capital goods.

The production of consumer goods is not impacted.

In combination B, capital goods is 10 units.

After technological change,

Capital goods = 10 + (0.40 * 10) = 10 + 4 = 14 units

Following is the complete table -

	A	B	C	D	E	F
Capital Goods	0	10	14	18	20	21
Capital Goods 2	0	14	19.6	25.2	28	29.4
Consumer Goods	125	100	75	50	25	0

(b)

Country is producing combination C.

Before technological change, country is producing 14 units of capital goods.

After technological change, country is producing 19.6 units of capital goods.

So,

The economy can have 5.6 more capital goods as a result of the technological improvement.

(c)

Technological change has impacted only production of capital goods. It has not impacted the production of consumer goods.

So, production of consumer goods will remain same even after the technological change.

Thus,

The economy can have 0 more consumer goods as a result of the technological improvement.

(d)

Before technological change, as production of consumer goods is increased from 0 to 100 units, the production of capital goods decreases from 21 to 10 units.

So,

The oppportunity cost of the first 100 consumer goods is 11 capital goods.

(e)

After technological change, as production of consumer goods is increased from 0 to 100 units, the production of capital goods decreases from 29.4 to 14 units.

So,

The oppportunity cost of the first 100 consumer goods is 15.4 capital goods.