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Refer to the diagram. If society is currently producing 12 units of bicycles and 2 units of computers and it now decides to increase computer output to 6, the cost

Refer to the diagram. If society is currently producing 12 units of bicycles and 2 units of computers and it now decides to increase computer output to 6, the cost

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Question: Given the situation, the number of bicycles that will be produced: 1. O will be 7 units of bicycles. 2. O will be 1 unit of bicycles. 3. O will be zero because unemployed resources are available. 4. O of doing so cannot be determined from the information given. ### Explanation: This is a multiple-choice question regarding the production units of bicycles. The correct answer, as indicated by the filled-in circle, is the first option, "will be 7 units of bicycles."
Transcribed Image Text:### Question: Given the situation, the number of bicycles that will be produced: 1. O will be 7 units of bicycles. 2. O will be 1 unit of bicycles. 3. O will be zero because unemployed resources are available. 4. O of doing so cannot be determined from the information given. ### Explanation: This is a multiple-choice question regarding the production units of bicycles. The correct answer, as indicated by the filled-in circle, is the first option, "will be 7 units of bicycles."
### Production Possibilities Frontier (PPF) Diagram The diagram depicts a Production Possibilities Frontier (PPF) that illustrates the trade-offs between producing bicycles and computers. The PPF shows the maximum possible output combinations of these two goods that a society can achieve, given its resources and technology. **Graph Description:** - **Axes:** - The horizontal axis represents the number of computers produced. - The vertical axis represents the number of bicycles produced. - **Point A:** Producing 0 computers and 14 bicycles. - **Point B:** Producing 2 computers and 12 bicycles. - **Point C:** Producing 4 computers and 9 bicycles. - **Point D:** Producing 6 computers and 6 bicycles. - **Point E:** Producing 8 computers and 0 bicycles. - **Point F:** An intersection showing the trade-off at 6 bicycles and 4 computers. - **Point G:** Outside the PPF, representing an unattainable level of production with the current resources and technology. **Scenario Analysis:** According to the accompanying text, if society is currently producing 12 units of bicycles (Point B) and 2 units of computers and decides to increase computer output to 6 units (Point D), it indicates a shift along the PPF curve. **Trade-off Explanation:** In this scenario, increasing computer production from 2 units to 6 units results in a decrease in bicycle production from 12 units to 6 units. This trade-off demonstrates the concept of opportunity cost, as producing more of one good necessitates producing less of another due to limited resources. ### Learning Points: 1. **Production Possibilities Frontier (PPF):** Visualizes the trade-offs and opportunity costs of producing two different goods. 2. **Opportunity Cost:** The loss of potential gain from other alternatives when one alternative is chosen. 3. **Economic Efficiency:** Points on the PPF represent efficient resource use, while points inside the curve indicate inefficient use, and points outside are unattainable with current resources. 4. **Shifts in the PPF:** Can result from changes in resources, technology, or other factors affecting production capacity. This example demonstrates fundamental economic principles, including opportunity cost, efficiency, and trade-offs, which are critical for understanding resource allocation in an economy.
Transcribed Image Text:### Production Possibilities Frontier (PPF) Diagram The diagram depicts a Production Possibilities Frontier (PPF) that illustrates the trade-offs between producing bicycles and computers. The PPF shows the maximum possible output combinations of these two goods that a society can achieve, given its resources and technology. **Graph Description:** - **Axes:** - The horizontal axis represents the number of computers produced. - The vertical axis represents the number of bicycles produced. - **Point A:** Producing 0 computers and 14 bicycles. - **Point B:** Producing 2 computers and 12 bicycles. - **Point C:** Producing 4 computers and 9 bicycles. - **Point D:** Producing 6 computers and 6 bicycles. - **Point E:** Producing 8 computers and 0 bicycles. - **Point F:** An intersection showing the trade-off at 6 bicycles and 4 computers. - **Point G:** Outside the PPF, representing an unattainable level of production with the current resources and technology. **Scenario Analysis:** According to the accompanying text, if society is currently producing 12 units of bicycles (Point B) and 2 units of computers and decides to increase computer output to 6 units (Point D), it indicates a shift along the PPF curve. **Trade-off Explanation:** In this scenario, increasing computer production from 2 units to 6 units results in a decrease in bicycle production from 12 units to 6 units. This trade-off demonstrates the concept of opportunity cost, as producing more of one good necessitates producing less of another due to limited resources. ### Learning Points: 1. **Production Possibilities Frontier (PPF):** Visualizes the trade-offs and opportunity costs of producing two different goods. 2. **Opportunity Cost:** The loss of potential gain from other alternatives when one alternative is chosen. 3. **Economic Efficiency:** Points on the PPF represent efficient resource use, while points inside the curve indicate inefficient use, and points outside are unattainable with current resources. 4. **Shifts in the PPF:** Can result from changes in resources, technology, or other factors affecting production capacity. This example demonstrates fundamental economic principles, including opportunity cost, efficiency, and trade-offs, which are critical for understanding resource allocation in an economy.
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