Question

hwlp

sidered a problem for Slep in and they eat gras em for American cattle ranchers. They dig cat grass necessary for cattle. Recently, for prairie dogs as pets. In some areas men are now fencing off prairie dog towns bed by their cattle. in a rancher's production option between showing increasing opportunity cost and show situations. (Use a separate graph for each The prairie dog has always been considered holes that cattle and horses can step in an ranchers have discovered that there is a de prairie dogs can sell for as high as $150. on their land so these towns will not be a Draw a production possibilities frontiers cattle production and prairie dog product what would happen in each of the following situation.) choosing to produce equal numbers of cattle and a. The outcome is efficient, with ranchers cl prairie dogs. (5 points) $200 each, so ranchers decide to allocate b. The price of prairie dogs increases to $20 additional land for prairie dogs. (5 points) ranchers, giving them 10,000 new acres of c. The government grants new leases to ranche grassland. (5 points) d. A drought destroys most of the available grass for grazing of cattle, but not for prairie dogs since they also eat plant roots. (5 points) e. An economist hired by the rancher said i. When the price of prairie dogs increases, the quantity demanded for prairie dogs would decrease. ii. The rancher should allocate more land to prairie dogs to make more profit. For each of i and ii, is it a positive statement or a normative statement? (6 points)

Answer 1

a. Increasing opportunity cost implies that the production possibility frontier will be of concave shape. And point A is in the middle of the PPF which implies that ranchers choosing to produce equal number of cattle and pairie dogs.

Pairie dog A-efficient outcome cattle production

b. When additional land is allocated to the pairie dogs, lesser land would then be available for cattle production and thus the PPF would pivot in the direction of pairie dog production.

Pairie dog Cattle dog

c. Government giving them new grasslands would mean having more land resource available for production of both the goods. The PPF would shift out to the right.

Pairie dog Cattle

d. Since there is less grass available for grazing but there is no change in dog production, the PPF will pivot inwards to the left.

Pairie dog Cattle