Answered: The following table shows a set of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6. Study Questions and Problems #6

The following table shows a set of hypothetical production possibilities for a nation producing automobiles and beef.

Combination	Automobiles	Beef
(Thousands)	(Thousands of tons)
A	0	10
B	2	9
C	4	7
D	6	4
E	8	0

On the following graph, use the blue points (circle symbol) to plot the production possibilities curve for the nation using the data in the preceding table. Line segments will automatically connect the points.

PPFFG012345678910109876543210Beef (Thousands of tons)Automobiles (Thousands)

The opportunity cost of the first 2,000 automobiles produced is

tons of beef.

Between which points is the opportunity cost per thousand automobiles highest?

A and B

B and C

C and D

D and E

The opportunity cost per thousand tons of beef is the highest between points

Using your answers in the preceding parts, you can see that the opportunity cost of 1,000 additional automobiles between points A and B is the opportunity cost of 1,000 additional automobiles between points D and E. This reflects the .

On the previous graph, use the grey point (star symbol) to plot point F where the nation is producing 2,000 tons of beef and 2,000 automobiles. Then use the black point (cross symbol) to plot point G where the nation is producing 6,000 tons of beef and 6,000 automobiles.

True or False: Point F illustrates an inefficient output level because the nation is overproducing, as it could satisfy more of society’s wants if it were producing at some point along the PPC, and point G illustrates an unattainable output level because it is within the nation’s present production capabilities.

False

True

Does this production possibilities curve reflect the law of increasing opportunity costs?

Yes, because the opportunity cost of automobiles increases as production of one output expands.

Yes, because the opportunity cost of automobiles decreases as production of beef expands.

No, because the opportunity cost of automobiles decreases as production of beef expands.

No, because the opportunity cost of automobiles increases as production of beef expands.

What assumptions could be changed to shift the production possibilities curve? Check all that apply.

The fixed resources assumption

The two-good-only economy assumption

The feasibility assumption

The fully employed resources assumption

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