Question

FUNDAMENTALS

This question examines the production possibilities of two individuals, Pedro and Jessica. You will construct the production possibilities frontier (PPF) for both individuals, identify each individual’s opportunity cost of producing different goods, and examine comparative advantages.

Pedro and Jessica each have limited productive resources, which they can employ either in the production of pencils or pens. Below, you are provided with the feasible combinations of pencils and pens that each individual can produce, and that employ all of their productive resources.

Jessica’s PPF Pencils Pens 5 0 4 2 3 4 2 6 1 8

Pedro’s PPF Pencils Pens 10 0 8 1 6 2 4 3 2 4

Task 1: In the graph below, construct Pedro’s PPF in blue ink. Be sure to place pencils on the horizontal axis and pens on the vertical axis.

Task 2: In the graph above, construct Jessica’s PPF in red ink.

Task 3: What is the opportunity cost of an additional pencil for Pedro?

                                          

Task 4: What is the opportunity cost of an additional pen for Pedro?

Task 5: What is the opportunity cost of an additional pencil for Jessica?

Task 6: What is the opportunity cost of an additional pen for Jessica?

Answer 1