QUESTION 11wineSERE48290807060504030PPFPortugalCPF201000 10 20 30 40 50 60clothc) 1 bottle of wineO d) 2 bottles of winee) 3 bottles of winewine908888888880706050403020EnglandPPF11. What is the relative price (opportunity cost) of cloth in England, before trade begins?O a) 1/2 yard of clothO b) 2 man-hours/bottleCPF1000 10 20 30 40 50 60cloth

The graph shows two graphs, one for Portugal and one for England, with a Production Possibility Frontier (PPF) and a Consumption Possibility Frontier (CPF) for each. Given a certain quantity of resources, the PPF illustrates the trade-off between manufacturing two things (in this example, wine and fabric). If there is trading, the CPF will indicate the different combinations of items that may be consumed, which could differ from the PPF.The issue seeks the relative price to determine (opportunity cost) of clothes in England prior to the start of commerce. The slope of the PPF is the potential cost of manufacturing one additional unit of fabricThe slope of the PPF can be calculated by taking two points on the frontier and using the formula:where:Change in Y represents the quantity of wine (the vertical axis), whereas change in X represents the quantity of fabric (the horizontal axis).We can usually take the intercepts where the PPF meets the axes from the PPF for England. These are the points at which one good's production is maximized at the price of not generating the other good at all. So we'll take:Point A is at (0, Quantity of Wine) because no cloth is created, while Point B is at (Quantity of Cloth, 0) because no wine is made.Because the PPF is a straight line, we can take the endpoints where it intersects the axes. In this scenario, we'll assume that the intercepts are as follows:Point A (0,60) for wine when there is no fabric produced, Point B (60,0) for clothes when there is no wine produced.These points result in the following modifications:Change in Y (ΔY) = 60 - 0 (a decrease in wine as we produce more cloth),Change in X (X) = 60 - 0 (an increase in clothes production).The opportunity cost of cloth in terms of wine is then the absolute value of the slope of the PPF, which is:Opportunity Cost = 1Therefore, for every additional unit of cloth England produces, it gives up the opportunity to produce 1 bottle of wine.Based on the given options, the answer is:c) 1 bottle of wine The opportunity cost of producing one more unit of cloth in terms of wine for England, as calculated from the PPF, is 1 bottle of wine. Therefore, for every additional unit of clothing England produces, it gives up the opportunity to produce 1 bottle of wine.Based on the given options, the answer is:c) 1 bottle of wine

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11. What is the relative price (opportunity cost) of cloth in England, before trade begins? O a) 1/2 yard of cloth O b) 2 man-hours/bottle O c) 1 bottle of wine O d) 2 bottles of wine e) 3 bottles of wine

11. What is the relative price (opportunity cost) of cloth in England, before trade begins? O a) 1/2 yard of cloth O b) 2 man-hours/bottle O c) 1 bottle of wine O d) 2 bottles of wine e) 3 bottles of wine

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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