To the right is a production possibilities table for consumer goods (automobiles

Question

To the right is a production possibilities table for consumer goods (automobiles) and capital goods (forklifts): a. Show these data graphically. Upon what specific assumptions is this production possibilities curve based? b. If the economy is at point C, what is the cost of one more automobile? 2/9 of a forklift Of one more forklift? Which characteristic of the production possibilities curve reflects the law of increasing opportunity costs: its shape or its length? c. If the economy characterized by this production possibilities table and curve were producing 3 automobiles and 20 forklifts, what could you conclude about its use of its available resources? d. Is production at a point outside the production possibilities curve currently possible? Could a future advance in technology allow production beyond the current production possibilities curve? Could international trade allow a country to consume beyond its current production possibilities curve?

Explanation / Answer

A. The assumption is the trade-off b/t autos and forklifts. And that in the hypothetical, the these are the only two goods being produced.

B. At C one more auto costs about 5 forklifts. One more forklift costs about 1/5th of an auto.

Increasing opportunity costs happen b/c it's not very easy to stop making autos and switch to forklifts (limits of labor skills, technology).

C. That it is being inefficient. It has the 'possibility' of producing about 3 more forklifts when 3 autos are being made.

D. An option beyond current possibility. Economic growth must occur.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.