2.7 Construct a production possibilities curve (PPC) for a nation facing increas
ID: 1250449 • Letter: 2
Question
2.7 Construct a production possibilities curve (PPC) for a nation facing increasing opportunity costs for producing food and video games. Show how the PPC changes given the following events.
A. A new and better fertilizer is invented.
B. Immigration occurs, and immigrants’ labor can be employed in both the agricultural sector and the video game sector.
C. A new programming language is invented that is less costly to code and is more memory-efficient, enabling the use of smaller game cartridges.
D. A heat wave and drought result in a 10 percent decrease in usable farmland.
2.9 In response to Senator Creighton's statement reported in Problem 2.8, Senator Long replies, "We must remain at our current production combination if we want to be able to produce more consumption goods in the future." Of the labeled points on the diagram, which could depict the future production combination Senator Long has in mind?
Explanation / Answer
2.7 draw a PPC with food on one axis and video games on the other. The increasing opportunity costs means that the production possibilities curve is concave to the origin (bowing outwards, away from the origin). A. A better fertilizer would increase the amount food that could be produced with the same amount of resources, so illustrate this on the PPC by moving it outward in the correct direction (if food were on the x axis, you would move the line out to the right while keeping it the same in the vertical direction, of video games). B. Since the labor could be applied in producing either, this would increase the amount of either that could be produced, so the entire PPC shifts out in both directions C. This would have the same effect as A, but expanding the PPC in the direction of video games instead of food. D. Should be pretty obvious, less farmland means less food can be produced, and which will move the PPC inward for food production (the opposite of A)
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