Chapter 2. Production Possibilities Frontier (PPF) Framework: Pre-Class & In-Cla

Question

Chapter 2. Production Possibilities Frontier (PPF) Framework: Pre-Class & In-Class Activities Packet Name/l.D. Number: Part 4B. Economic Equations and Graphs Section: Date: 620A of goods X and Y 9. Tina can produce any of the following (a) 100X and 0Y, (b) 50X and 25Y, and (c) OX and 50Y. David can produce any of the following combinations of goods X and Y: (a) 50X and OY, (b) 25X and 40Y, and (c) OX and 80Y Who has a comparative advantage in the production of good X? of good Y? Explain your answer. 220 20 30 4 S0 70 1.What is gained by choosing to produce at point B, instead of at point A? 2 What is the opportunity cost of choosing to produce at point B, instead of at point A? 3.What is gained by choosing to produce at point C, instead of at point B? 10. Using the data in Problem 9, prove that both Tina and David can be made better off through specialization and trade. s the opportunity cost of choosing to produce at point C, instead of at point B? gains as one 5. Continue moving point by point do chooses to move down this PPF from point A to B to C to D and so forth? 6.What is the pattern of opportunity costs as one chooses to move down this PPF from point A to B to C to D and so forth? 7.Does the law of increasing Paper Products? How do you know? costs hold for book production at Pinnacle 8.Explain how to determine whether the law of increasing opportunity cost holds for towel production at Pinnacle Paper Products.

Explanation / Answer

Question 4B

Part 1

At point A, 620 rolls of paper towels and 0 books are produced.

At point B, 610 rolls of paper towels and 10 books are produced.

It can be seen that as we move from point A to point B, 10 books are now being produced.

So,

10 books is gained by choosing to produce at point B, instead of at point A.

Part 2

It can be seen that as we move from point A to point B, production of 10 rolls of paper towels is sacrificed.

So,

The opportunity cost of choosing to produce at point B, instead of at point A is 10 rolls of paper towels.

Part 3

At point B, 610 rolls of paper towels and 10 books are produced.

At point C, 590 rolls of paper towels and 20 books are produced.

It can be seen that as we move from point B to point C, 10 books more are now being produced.

So,

10 books is gained by choosing to produce at point C, instead of at point B.

Part 4

It can be seen that as we move from point C to point D, production of 20 rolls of paper towels is sacrificed.

So,

The opportunity cost of choosing to produce at point C, instead of at point B is 20 rolls of paper towels.

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