Question

The Antioquia region of Colombia produces coffee beans, and in this example the same land can also be used to grow pepper. The table shows production possibilities: Coffee Pepper (kilograms per day below ) (kilograms per day) ___________________________________________ 300 and 0 200 and 50 100 and 100 0 and 150 a) Draw a graph showing Antioquia’s PPF and explain how it illustrates scarcity. b) If Antioquia produces 150 kilograms of coffee a day, how much pepper must it produce to achieve production efficiency?  

Answer 1

(a)

Antioquia's PPE А Pepper (Kilograms per day) 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 B 0 50 100 250 300 350 150 200 Coffee (Kilograms per day)

Antioquia's PPF depicts the combination of coffee and pepper poduction of Antioquia region.

Antioquia region can produce any combination of coffee and peper which lies inside and on the PPF with the full utilization of available resources.

For example, Point B and Point C are depicts that situation.

This PPF depicts the scarcity of resources, Antioquia can't produce ouside the PPF (like point A).

Point A is unattainable because production possibility are bounded due to scarcity, i.e., Antioquia have limited resources to produce combination under the PPF.

They does not have enough resources to produce outside PPF. (SCARCITY)

Note: Scarcity of resources means there is limited resources to satiffy the human wants and need

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(b)

Coffee (Kilograms per day)	Pepper (Kilograms per day)
300	0
200	50
100	100
0	150

We can see that from the above table that, to increase Coffee prodcution by 100 Kilograms per day the Pepper production will decrease by 50 kilogram per day.

Hence, opportunity cost of producing 1 kilogram Coffee = (50 / 100) = 0.5 Kilogram Pepper.

Suppose Antioquia is producing 0 kilogram of coffee and 150 kilogram pepper.

If production of cofee increase to 150 kilograms then pepper production will decrease to 75 kilogram.

It means 75 kilogram Pepper should be produce with 150 kilogram coffee in order to achieve production efficiency.

Note: Efficiency achieved when Antioquia produces on the PPF. Graphically, we can see that when coffee production is 150 Kg then pepper production is 75 Kg.