Josel owns two fields: Green . Joint PPF and quantity restriction field and Blue field. He can produce corn and wheat. Green field has 80 acres, and it takes 10 acres to produce 1 bushel of corn and 20 acres to produce 1 bushel of wheat. Blue field has 100 acres, and it takes 20 acres to produce 1 bushel of corn and 10 acres to produce 1 bushel of wheat. Suppose that the government imposes a quantity restriction on only corn. Specifically, (a) A quantity restriction of 4 bushels of corn in Green field. That is, Green field is allowed to produce at most 4 bushels of corn, and A quantity restriction of 2 bushels of corn in Blue field. That is, Blue field is allowed to produce at most 2 bushels of corn. Sketch the joint PPF. Clearly label your graph (i.e., indicate values
Josel owns two fields: Green . Joint PPF and quantity restriction field and Blue field. He can produce corn and wheat. Green field has 80 acres, and it takes 10 acres to produce 1 bushel of corn and 20 acres to produce 1 bushel of wheat. Blue field has 100 acres, and it takes 20 acres to produce 1 bushel of corn and 10 acres to produce 1 bushel of wheat. Suppose that the government imposes a quantity restriction on only corn. Specifically, (a) A quantity restriction of 4 bushels of corn in Green field. That is, Green field is allowed to produce at most 4 bushels of corn, and A quantity restriction of 2 bushels of corn in Blue field. That is, Blue field is allowed to produce at most 2 bushels of corn. Sketch the joint PPF. Clearly label your graph (i.e., indicate values
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Josel owns two fields: Green
4. Joint PPF and quantity restriction
field and Blue field. He can produce corn and wheat. Green field has 80 acres, and it
takes 10 acres to produce 1 bushel of corn and 20 acres to produce 1 bushel of wheat.
Blue field has 100 acres, and it takes 20 acres to produce 1 bushel of corn and 10
acres to produce 1 bushel of wheat. Suppose that the government imposes a quantity
restriction on only corn. Specifically,
A quantity restriction of 4 bushels of corn in Green field. That is, Green field is
allowed to produce at most 4 bushels of corn, and
A quantity restriction of 2 bushels of corn in Blue field. That is, Blue field is
allowed to produce at most 2 bushels of corn.
(a)
Sketch the joint PPF. Clearly label your graph (i.e., indicate values
for slopes, intercept(s), endpoint (s), and kink(s)).
Transcribed Image Text:(b) Suppose that Josel is visited by outside merchants who sell and buy corn and
wheat at prices Pc = 3 and Pw = 1, respectively.
i.
ii.
iii.
What is the value-maximizing point of total production? In other
words, how many bushels of corn and wheat are produced? Explain your
answer.
What is the value of production in dollars (aka, Josel's income or
value of production)? Explain your answer.
On the graph drawn in part a., indicate the value-maximizing
point of total production, and use your answer in part b.i. to sketch the CPF.
Clearly label the CPF (i.e., indicate values for slope and intercepts).
iv.
Josel decides to consume 5 bushels of wheat and as many bushels
of corn as possible. How many bushels of corn does Josel consume? Ex-
plain your answer. On the graph drawn in part a., indicate Josel's point of
consumption.
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