The production possibilities table below illustrates the real economic sacrifice
ID: 1234791 • Letter: T
Question
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The production possibilities table below illustrates the real economic sacrifices (costs) which the choice of different production combinations entails
i. the first ton of coal ii. three tons of coal iii. the third ton of coal iv. one ton of coal when two tons are being produced (b) Is it reasonable to expect costs to rise as more and more of a product is produced? Explain why this must occur.
Combinations Pounds of Bread Tons of Coal a 12,000 0 b 11,000 1 c 9,000 2 d 5,000 3 e 0 4
- Use a grid at least 4" by 4" to graph the production possibilities shown by the table in question 1. Now, on the same diagram, plot the following production possibilities data:
Explain what could have caused the production possibilities curve to move in the manner shown by the difference between curve 1 and curve 2 in the diagram you prepared in question. You do not have to send the diagram, just the explanation describing what happened and the probable cause. (a) What is the cost of producing:
i. the first ton of coal ii. three tons of coal iii. the third ton of coal iv. one ton of coal when two tons are being produced i. the first ton of coal ii. three tons of coal iii. the third ton of coal iv. one ton of coal when two tons are being produced (b) Is it reasonable to expect costs to rise as more and more of a product is produced? Explain why this must occur.
Combinations Pounds of Bread Tons of Coal a 12,000 0 b 11,000 1 c 9,000 2 d 5,000 3 e 0 4
Explanation / Answer
i. the first ton of coal b) Production Costs, Demand, and Competition Influences on Prices. As the chart suggests, prices that farmers receive for their commodities and other products depend on supply and demand factors. The amount of output available from other farmers, from imports, or the extent to which other products represent good substitutes affect the supply side. Demand for the product can ultimately be traced back from the consumer through the value chain. Manufacturers will base their orders on expectations of demand. If demand is expected to be high, prices will tend to rise; if less demand is expected, prices are more likely to decrease. Several factors affect farm value. Some are: Degree of processing required. For foods that require more processing (such as the wheat that ultimately makes it into products such as bread and pizza), more of the value has to be added after the farm. Thus, we expect farm value to be less. Perishability. Perishable products require more expensive and less efficient transportation. It may also be necessary to add extra processing or to maintain extra capacity perform the processing quickly. Lettuce has to be transported very quickly, often in air conditioned trucks. Shorter and less efficient channels must be used to get the product to the store in fresh condition. Seasonality of supply. It may be necessary to add extra processing or to maintain extra capacity perform the processing of perishable seasonal crops quickly. Canners must maintain capacity that can be used only during part of the year to be able to handle the large crop of peaches coming in at harvest time. There may not be any use for the canning plants during the rest of the year, so the total yearly cost has to be absorbed by the crops processed during a short period of time. Canned and frozen crops may be less attractive to consumers, reducing the value of the crop during off-season. Seasonality of supply. A commodity disproportionately in demand at one time—such as turkeys whose sales are concentrated during November and December—often require services such as freezing and/or storage, adding to costs. Transportation costs. Products that must be transported for long distances, in small quantities, or are difficult to handle raise costs. Bulk-to-value ratio. In part based on transportation costs, bulkier products are more difficult to handle and store. Meat has high value for its bulk but wheat does not. For corn, the cob and leaves carry little if any value.
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