Question 2

TABLE 2 shows the production possibilities between rice and beef

A B C D E

Rice 0 50 90 120 140

Beef 50 45 35 20 0

a) What is the opportunity cost of producing 90 rice? (Hint: Answer should be in terms of what is given up. So the cost of producing 90 rice is how much beef is given up)

b) What is the opportunity cost of going from possibility C to possibility D?

c) What is the opportunity cost of going from possibility D to possibility C?

g) Draw the production possibilities curve. Label it PP1. Label each of the five output combinations with the letters a through e. Label beef on the vertical axis and rice on the horizontal axis.

f) Discuss the effect from a technological change and economic growth and how it will impact our 2-good model.