3. Suppose the Canada can produce cattle or corn with a given amount of resources. Below is a graph depicting the production possibility frontier for Canada and the marginal benefit and cost of a bushel of corn. Discuss the relationship between the marginal cost and marginal benefit of corn and the production of both corn and cattle. (a) Discuss the overallocation of resources, underallocation of resources, and optimal allocation of resources. (b) When operating at the optimal level of corn production, what is the optimal level of cattle production? Why is this the optimal amount (why not more or less cattle)?
3. Suppose the Canada can produce cattle or corn with a given amount of resources. Below is a graph depicting the production possibility frontier for Canada and the marginal benefit and cost of a bushel of corn. Discuss the relationship between the marginal cost and marginal benefit of corn and the production of both corn and cattle. (a) Discuss the overallocation of resources, underallocation of resources, and optimal allocation of resources. (b) When operating at the optimal level of corn production, what is the optimal level of cattle production? Why is this the optimal amount (why not more or less cattle)?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
3. Suppose the Canada can produce cattle or corn with a given amount of resources. Below is a graph
depicting the production possibility frontier for Canada and the marginal benefit and cost of a bushel of
corn. Discuss the relationship between the marginal cost and marginal benefit of corn and the production of
both corn and cattle.
(a) Discuss the overallocation of resources, underallocation of resources, and optimal allocation of resources.
depicting the production possibility frontier for Canada and the marginal benefit and cost of a bushel of
corn. Discuss the relationship between the marginal cost and marginal benefit of corn and the production of
both corn and cattle.
(a) Discuss the overallocation of resources, underallocation of resources, and optimal allocation of resources.
(b) When operating at the optimal level of corn production, what is the optimal level of cattle production? Why
is this the optimal amount (why not more or less cattle)?
is this the optimal amount (why not more or less cattle)?
Transcribed Image Text:Cattle
(in billions of pounds)
40
30
20
Production Possibility
A
Frontier
B
с
10 15 20
Bushels of Corn
(in billions)
Marginal Benefit and
Marginal Cost
$9
6
6
3
برا
MC
MB
10
15
20
Quantity of Bushels of Corn
(in billions)
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