Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 2, Problem 1WNG
To determine
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Assume you have a production possibilities frontier (PPF) bowed out from the origin with healthcare on the Y axis and education on the X axis.
What does the PPF represent?
How is opportunity cost demonstrated using the PPF?
Use the PPF to answer the following questions:
(a) At point F, how many sweaters are being produced? How many hard drives?
(b) Label points A-H as either efficient, inefficient, or unattainable.
(c) Can we determine if point F is productively efficient? If so, is it productively efficient?
(d) Can we determine if point F is allocatively efficient? If so, is it allocatively efficient?
In Kessy’s old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in a day. Now he has a bigger oven and kitchen.
Draw Kessy’s initial PPF assuming constant opportunity cost between cookies and lemonade. Label it PPF1. [For this question, let cookies be illustrated on the horizontal axis.]
Given PPF1, what is the opportunity cost of producing more cookies? In other words, how much lemonade must Kessy sacrifice to produce, say, one more cookie?
Draw Kessy’s new PPF (label it PPF2) after he receives the new appliances.
Chapter 2 Solutions
Macroeconomics
Ch. 2.1 - Prob. 1STCh. 2.1 - Prob. 2STCh. 2.1 - Prob. 3STCh. 2.1 - Prob. 4STCh. 2 - Prob. 1QPCh. 2 - Prob. 2QPCh. 2 - Prob. 3QPCh. 2 - Prob. 4QPCh. 2 - Prob. 5QPCh. 2 - Prob. 6QP
Ch. 2 - Prob. 7QPCh. 2 - Prob. 8QPCh. 2 - Prob. 9QPCh. 2 - Prob. 10QPCh. 2 - Prob. 11QPCh. 2 - Prob. 12QPCh. 2 - Prob. 13QPCh. 2 - Prob. 1WNGCh. 2 - Prob. 2WNGCh. 2 - Prob. 3WNGCh. 2 - Prob. 4WNGCh. 2 - Prob. 5WNGCh. 2 - Prob. 6WNGCh. 2 - Prob. 7WNGCh. 2 - Prob. 8WNGCh. 2 - Prob. 9WNGCh. 2 - Prob. 10WNGCh. 2 - Prob. 11WNGCh. 2 - Prob. 12WNG
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- Diagrams 1 and 2 below depict the production possibility frontier (PPF) for Rosie’s Bakery. Answer the questions below and show all calculations where appropriate. From Diagram 1, calculate the opportunity cost of increasing the production of cakes from 8 to 12 with the opportunity cost of increasing the production of cakes from 12 to 14. Show all calculations. In Diagram 2, how would explain the shift from PPF1 to PPF2 at Rosie’s Bakery using economic theory?arrow_forwardSuppose Poland produces only cars and trucks. The resources that are used in the production of these two goods are not specialized—that is, the same set of resources is equally useful in producing both trucks and cars. The shape of Poland’s production possibilities frontier (PPF) should reflect the fact that as Poland produces more trucks and fewer cars, the opportunity cost of producing each additional truckarrow_forwardConsider an economy than only produces two goods - Blueberries and Batteries. Step 1: Draw a production possibilities frontier (PPF) for this economy. Label blueberries on the vertical axis and batteries on the horizontal axis. Label one point that is "efficient", one point that is "inefficient", and one point that is "unattainable". Step 2. Draw another PPF of the economy with the axes labeled. Grab another color pen/pencil/highlighter and show how the PPF would change if there was a technological change that increased the production of batteries only. (Hint: The intercept for blueberries will not change.) Clearly label the new PPF. Step 3. Draw another PPF of the economy with the axes labeled. Grab another color pen/pencil/highlighter and show how the PPF would change if there was a drought that destroyed some of the blueberry harvest. (Hint: The intercept for batteries will not change.) Clearly label the new PPF. Step 4: Draw another PPF of the economy with the axes labeled. Grab…arrow_forward
- 1. 2. 3. Suppose that the community of Markstown produces two goods: Michelob light beer (MLB) and bacon/lettuce/tomato sandwiches (BLTs). Assuming increasing opportunity costs, draw a production possibilities curve (PPC) for Markstown (be sure to label both axes correctly). On your graph of the PPC from #1, find and label the following: an inefficient point (label it X) an efficient point (label this one Y) an unattainable point (label it Z) a. b. C. Due to an increase in immigration across its borders, Markstown has experienced an increase in the size of its labor force. On your graph above, show how this change affects the PPC of Markstown.arrow_forwardSuppose that the community of Markstown produces two goods: Michelob light beer(MLB) and bacon/lettuce/tomato sandwiches (BLTs). Assuming increasingopportunity costs, draw a production possibilities curve (PPC) for Markstownarrow_forwardThe production possibilities frontier (PPF) is a simplified economic model that illustrates the different combinations of two products that an economy can produce given the resources it has available. Assume the country of Turkey can produce only apples or oranges and answer each of the following questions A if a flood destroyed 20% of the farmland used to grow apples and oranges, which direction will Turkey's PPF shift /your answer should be "outwards" or "inwards") and why? B. Turkey decides to begin increasing, the production of oranges. Explain the implications of this using the term "opportunity cost" C An advancement in organic pesticide has allowed for less fruit to be damaged by pests. Explain how this change would alter the PPF.arrow_forward
- Solve the Given question from economics question attached below?arrow_forwardDrawing a production possibilities frontier (PPF) Instructions: Consider an economy than only produces two goods - Blueberries and Batteries. Step 1: Draw a production possibilities frontier (PPF) for this economy. Label blueberries on the vertical axis and batteries on the horizontal axis. Label one point that is "efficient", one point that is "inefficient", and one point that is "unattainable". Step 2. Draw another PPF of the economy with the axes labeled. Grab another color pen/pencil/highlighter and show how the PPF would change if there was a technological change that increased the production of batteries only. (Hint: The intercept for blueberries will not change.) Clearly label the new PPF. Step 3. Draw another PPF of the economy with the axes labeled. Grab another color pen/pencil/highlighter and show how the PPF would change if there was a drought that destroyed some of the blueberry harvest. (Hint: The intercept for batteries will not change.) Clearly label the new…arrow_forwardThe PPF illustrates the principles of constrained choice, opportunity cost, and scarcity. Consider a PPF below for motorcycles and hybrid cars. D Motorcydes According to Figure above, as the economy moves from Point A to Point B, the opportunity cost of motorcycles, measured in terms of hybrid cars, increases. initially increases, then decreases. one decreases. remains constant. Hybrid carsarrow_forward
- Suppose Argentina produces only smart watches and trucks. The resources that are used in the production of these two goods are specialized-that is, some resources are more suitable for producing smart watches than trucks, whereas others are more suitable for producing trucks than smart watches. The shape of Argentina's production possibilities frontier (PPF) should reflect the fact that as Argentina produces more trucks and fewer smart watches, the opportunity cost of producing each additional truck The following graphs show two possible PPFs for Argentina's ecor SMART WATCHES PPF 1 Graph 1 TRUCKS ? decreases increases remains constant SMART WATCHES PPF 2 PPF (PPF1) and a bowed-out PPF (PPF2). Graph 2 TRUCKS (?) Based on the previous description, the tradeoff Argentina faces between producing trucks and smart watches is best represented byarrow_forwardTRADE Prior to the global pandemic, the aggregate output of sweet potatoes(S) and green bananas (G) is given in the combinations below. All figures are written in thousands of lbs. Sweet potatoes (S) Green Bananas (G) 210 180 25 150 45 120 58 90 68 60 75 30 78 80 Using the table above, answer the following questions. a) Construct Dominica's PPF. b) Explain whether the rinciple of increasing opportunity cost аpplies. c) Explain ND ILLUSTRATE THE EFFECTS OF THE GLOBAL PANDEMIX ON Dominica's aggregate output. d) Assuming Dominica wishes to trade, t=what can be done to improve its ability to engage in mutually beneficial trade.arrow_forwardDraw a PPF for butter and guns production.a. Explain verbally and graphically the concept of “free lunch.” b. Explain verbally and graphically what movement between two production points on the PPF represents.Does this qualify as “a free lunch?” Why or why not?arrow_forward
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