The following data show the production possibilities for a hypothetical economy during one year: OUTPUT OF X
Question:
The following data show the production possibilities for a hypothetical economy during one year:
OUTPUT OF X OUTPUT OF Y
1000 ...............0
800 ..............100
600 ..............200
400 ..............300
200 ..............400
0 ..............500
a. Plot these points on a graph. Do they appear to lie along a straight line? What is that straight line’s production possibility frontier?
b. Explain why output levels of X = 400, Y = 200 or X = 300, Y = 300 are inefficient. Show these output levels on your graph.
c. Explain why output levels of X = 500, Y = 350 are unattainable in this economy.
d. What is the opportunity cost of an additional unit of X output in terms of Y output in this economy? Does this opportunity cost depend on the amounts being produced?
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
Step by Step Answer:
a b Both these points lie below the f...View the full answer
Intermediate Microeconomics and Its Application
ISBN: 978-0324599107
11th edition
Authors: walter nicholson, christopher snyder
