1. A simple economy has 100 workers and produces only two goods-coffee and doughnuts. Labour is...

 

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1. A simple economy has 100 workers and produces only two goods-coffee and doughnuts. Labour is the only factor of production, but some workers are better suited to producing coffee than doughnuts (and vice versa). The table below shows the maximum amount of output of each good possible from various levels of labour input. Number of workers producing coffee c) d) e) 0 25 50 75 100 Monthly production of coffee. (hundreds of pounds) 0 20 50 75 80 Number of workers producing doughnuts 100 75 50 25 0 Monthly production of doughnuts (hundreds) 600 550 400 150 0 a) On graph paper. plot the production possibilities frontier for this economy. (2 marks) b) If the economy is currently producing 2000 pounds of coffee (20 hundreds) and 55 000 doughnuts (550 hundreds). what is the opportunity cost of producing another 3000 pounds (30 hundreds) of coffee? (2 marks) Can this economy produce 40 000 doughnuts and 4000 pounds of coffee? Explain. (2 marks) Can this economy produce 30 000 doughnuts and 6500 pounds of coffee? Explain. (2 marks) Suppose that the technology used to produce coffee improves so that the maximum amount of coffee produced from any given amount of labour increases by 10%. Illustrate on graph paper what happens to the production possibilities curve. (2 marks) 1. A simple economy has 100 workers and produces only two goods-coffee and doughnuts. Labour is the only factor of production, but some workers are better suited to producing coffee than doughnuts (and vice versa). The table below shows the maximum amount of output of each good possible from various levels of labour input. Number of workers producing coffee c) d) e) 0 25 50 75 100 Monthly production of coffee. (hundreds of pounds) 0 20 50 75 80 Number of workers producing doughnuts 100 75 50 25 0 Monthly production of doughnuts (hundreds) 600 550 400 150 0 a) On graph paper. plot the production possibilities frontier for this economy. (2 marks) b) If the economy is currently producing 2000 pounds of coffee (20 hundreds) and 55 000 doughnuts (550 hundreds). what is the opportunity cost of producing another 3000 pounds (30 hundreds) of coffee? (2 marks) Can this economy produce 40 000 doughnuts and 4000 pounds of coffee? Explain. (2 marks) Can this economy produce 30 000 doughnuts and 6500 pounds of coffee? Explain. (2 marks) Suppose that the technology used to produce coffee improves so that the maximum amount of coffee produced from any given amount of labour increases by 10%. Illustrate on graph paper what happens to the production possibilities curve. (2 marks)

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Answer A Graph is below B In order to increase production of coffee from 2000 ... View the full answer