4. Shifts in production possibilitiesSuppose Spain produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier foralfalfa, an agricultural good, and locomotives, a capital good.Drag the production possibilities frontier (PPF) on the graph to show the effects of a breakout of avian flu that sickens millions of workers.Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points willsnap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.(?420PPF35028021014070PPF4080120160200240ALFALFA (Millions of bushels)LOCOMOTIVES (Thousands)

Answered: 4. Shifts in production possibilities…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Shifts in production possibilities
Suppose Spain produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for
alfalfa, an agricultural good, and locomotives, a capital good.
Drag the production possibilities frontier (PPF) on the graph to show the effects of a breakout of avian flu that sickens millions of workers.
Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will
snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.
(?
420
PPF
350
280
210
140
70
PPF
40
80
120
160
200
240
ALFALFA (Millions of bushels)
LOCOMOTIVES (Thousands)

Expert Solution

Step 1

In the given diagram, an economy produces two goods i.e. LOCOMOTIVE and ALFALFA. In this, the locomotive is a capital good and alfalfa is an agricultural good. This implies the production of locomotives depends on machinery (capital goods) and the production of alfalfa depends on labor (agriculture goods). The initial production combination is the PPF curve on the above graph.

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