Question

Table 1.15. TABLE 1.15 WINE CHEESE %Inputs Output %Inputs Output 0 20 40 60 80 100 30 50 65 75 80 20 40 60 80 100 0 40 70 95 105 110 a) From these data. calculate Utopias production possibilities to co these data, calculate Utopia's production possibilities to complete TABLE 1.16 Cheese 0 Wine 0 b) Can Utopia produce 65 cheese and 95 wine? Answer: c) If Utopia is at D, what is the total cost of 10 more d) If Utopia is at D, what is the total cost of 25 more wi Answer: Answer:

Answer 1

In order to fully utilise its resources, a nation uses 'all' of its inputs to produce as much output as it can that is, 100% of its inputs. a) Using this fundamental, we calculate the table values by making use of 100% of Utopia's inputs.

	A	B	C	D	E	F
Cheese	0	30	50	65	75	80
Wine	110	105	95	70	40	0

b) When Utopia produces 65 units of cheese, it is using 60% of its inputs and when it produces 95 units of wine, it is again using 60% of its inputs. However, this combination of output is not attainable since it is using more than 100% of Utopia's inputs together which is not feasible. It lies outside the production possibilities of Utopia.

Answer: No, Utopia cannot produce 65 units of cheese and 95 units of wine.

c) When Utopia is at D (65, 70), moving to E (75, 40) will cost it to give up 30 units of wine for the extra 10 units of cheese. That is, it has to replace 20% inputs in wine production to an extra 20% inputs for cheese production.

d) To move from D (65, 70) to 25 more units of wine, that is, C (50, 95), Utopia has to give up 15 units of cheese. That is it will cost the country 15 less units of cheese. It has to replace 20% inputs in cheese production to an extra 20% inputs for wine production.