One company produces only 2 goods: pillows and blankets and its PPF is represented in the graph below: 1.1. What is the opportunity cost of the first 20 pillows produced by this company? 1.2. What is the AVERAGE opportunity cost per pillow of the first 20 pillows produced by this company? 1.3. What is the opportunity cost of the last 10 pillows produced by this company? 1.4. What is the AVERAGE opportunity cost per pillow of the last 10 pillows produced by this company? 1.3. Give an example of a shock that would make this company produce at point F. Give another example of a shock that would make this company produce at point B.
One company produces only 2 goods: pillows and blankets and its PPF is represented in the graph below: 1.1. What is the opportunity cost of the first 20 pillows produced by this company? 1.2. What is the AVERAGE opportunity cost per pillow of the first 20 pillows produced by this company? 1.3. What is the opportunity cost of the last 10 pillows produced by this company? 1.4. What is the AVERAGE opportunity cost per pillow of the last 10 pillows produced by this company? 1.3. Give an example of a shock that would make this company produce at point F. Give another example of a shock that would make this company produce at point B.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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One company produces only 2 goods: pillows and blankets and its
1.1. What is the
1.2. What is the AVERAGE opportunity cost per pillow of the first 20 pillows produced by this company?
1.3. What is the opportunity cost of the last 10 pillows produced by this company?
1.4. What is the AVERAGE opportunity cost per pillow of the last 10 pillows produced by this company?
1.3. Give an example of a shock that would make this company produce at point F. Give another example of a shock that would make this company produce at point B.
Transcribed Image Text:This image depicts a graph showing the trade-off between two goods: blankets and pillows. The x-axis represents the number of pillows, ranging from 0 to 80, while the y-axis represents the number of blankets, ranging from 0 to 100. The graph includes a curve illustrating a production possibilities frontier (PPF), which represents the maximum achievable combinations of the two goods given the available resources and technology.
Key points marked on the graph:
- **Point A**: Around 20 pillows and 80 blankets.
- **Point B**: Around 35 pillows and 50 blankets.
- **Point C**: Around 50 pillows and 20 blankets.
- **Point D**: Approximately 40 pillows and 45 blankets (this point appears on the curve).
- **Point F**: Approximately 60 pillows and 10 blankets.
- **Point G**: Approximately 70 pillows and 0 blankets (off the curve – beyond the feasible region).
- **Point H**: Approximately 60 pillows and just under 10 blankets (on the curve).
The curve demonstrates the concept of opportunity cost in economics, highlighting how producing more of one good entails producing less of the other. Point G is unattainable given the current resources, while any point on the curve, like point D, represents an efficient allocation of resources. Points inside the curve, such as B, represent inefficiency.
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