An economy has the following Production Possibilities Schedule: Consumer Goods P
ID: 1216592 • Letter: A
Question
An economy has the following Production Possibilities Schedule:
Consumer Goods Producer Goods
0 500
150 400
230 300
290 200
330 100
350 0
Assume the nation is currently producing 290 Consumer Goods and 200 Producer Goods. What is the cost of 10 additional Consumer Goods?
Assume the nation is currently producing 290 Consumer Goods and 200 Producer Goods. What is the cost of 20 additional Producer Goods?
Assume the nation is currently producing 290 Consumer Goods and 200 Producer Goods. Another nation (Nation A) approaches this nation (Nation B) and offers to buy 40 units of Producer Goods. This means Nation B will have to increase production of Producer Goods by 40 to 240. Nation A has offered to trade 30 Consumer Goods for the 40 Producer Goods. Should Nation B accept the offer and produce the additional Producer Goods for Nation A?
Explanation / Answer
producing 10 additional consumer good will lead to a reduction of 25 units of producer goods
Yas it should accept the offer as producing 40 producer goods will reduce 16 units of consumer goods and after trade they will get 30 units of consumer goods in exchange of 40 producer goods.
Opp.cost change in x/change in y (330-290)/(100-200) = 40/100 = 0.4 producing 20 additional producer good will lead to a reduction of 8 units of consumer goodsproducing 10 additional consumer good will lead to a reduction of 25 units of producer goods
Yas it should accept the offer as producing 40 producer goods will reduce 16 units of consumer goods and after trade they will get 30 units of consumer goods in exchange of 40 producer goods.
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