Question

Use the production possiblties table for TVs and Melons to answer the following questions. Production Alternative (Pre-training A B C D 10 9 6 0 TVs Melons 1. Su ppose the government decides to enact a worker training program focused on melon production. As a result of the program, melon production increases by 200%, what is the new production possibilities table? Hint multiply the melon numbers above by 3. Production Alternative (Post-training) A, 10 9 1 D, B' C, IVs Melons 0 2. What is the opportunity cost of moving from production alternative A to B (pre-training)? 3. What is the opportunity cost of moving from production alternative A' to B' (post-training)? 4. Graph and label both the old (pre -training) and the new (post-training) production possibilities curves Production Possibilities 12 10 04 6 810 12 14 Melons 5. Is the production of 9 TVs and 2 melons attainable pre-training? 6. Is the production of 9 TV's and 2 melons attainable post-training?

Answer 1

2.

1)

Production Alternative	A'	B'	C'	D'
TVs	10	9	6	0
Melons	0+200%of 0 = 0	1 + 200% of 1 = 3	6	12

2) Opportunity cost is the value of next best alternative foregone.

When producer increases production of Melons from 0 to 1 then production alternative moves from A to B. To increase production of melons, producer has to give up some production of TVs which is the opportunity cost.

Opportunity cost = 10 - 9 = 1 TV

3) When producer increases production of Melons from 0 to 3 then production alternative moves from A' to B'. To increase production of melons, producer has to give up some production of TVs which is the opportunity cost.

3 melons = 1 TV

1 melon = 1/3 = 0.33 TV

Opportunity cost of producing 1 more melon is 0.33 TVs.

4)

5) Not attainable at pre-training because point lies above PPC.

6) Attainable after-training because point lies below PPC.