Question

urgent please

Production Possibilities Analysis The table below is a set of hypothetical production possibilities for a nation. . Automobiles Beef Combination (thousands) (thousands of tons) 10 4 0 9-4 10 a. Plot these production possibilities data. What is. the opportunity cost of the first 2,000 automobiles produced? Between which points is the oppor- tunity cost per thousand automobiles highest? Between which points is the opportunity cost per thousand tons of beef highest? b. Label a point P inside the curve. Why is this an inefficient point? Label a point G outside the curve. Why is this point unattainable? Why are points A through E all efficient points? .c. Does this production possibilities curve reflect the law of increasing opportunity costs? Explain. d. What assumptions could be changed to shift the production possibilities curve?

Answer 1

Answers;

A). As we know that opportunity cost is the cost of availing one opportunity in terms of the loss of the other opportunity. Therefore, when we produce 2000 automobiles we are not in a possition to produce all 10,000 tons of beef but only 9,000 tons. So, 1000 tons of beef is opportunity cost of producing 2000 automobiles. Between production of 6 to 8 thousand automobiles the opportunity cost is very high and between 0 to 2 thousands it is low.

B). If we label a point `F` inside production possibility curve (PPC) it is considered inefficient because at this lavel we are under producing both products and we have enough resources to increase the production of both products. If we plot any point outside the PPC (like point G) it is considered unattainable combination of both products because at this lavel we does not have enough resources to produce this lavel production.

C). Yes this PPC reflects increasing opportunity cost phenomenon because as we go increasing the production of automobiles its opportunity cost goes also on increasing as in 1st combination it is 1000 tons of beef in 2nd combination it is 2000 tons then 3000 tons and then 4000 tons of beef.

D). In order to shift PPC following ansumptioms must chang

1. Fixed resources. To Shift PPC resources must change/increase

2.Fixed techonology. Techonology must also undergo change to shift PPC.