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?