Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 2, Problem 2WNG
To determine
Illustration of
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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.
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?
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 PPF.
Step 4: Draw another PPF of the economy with the axes labeled. Grab…
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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- Drawing 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_forwardIn 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.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_forward
- Solve the Given question from economics question attached below?arrow_forwardConsider an economy that produces two goods: X and Y. The following two graphs (A and B) each depict a scenario where the economy starts on the green production possibilities frontier (PPF 1). Each scenario depicts a shift from the first PPF to the second PPF in blue (PPF 2). Use the graphs to answer the question that follows. Graph A PPF PPF 1 2 Graph B ? Y Which graph depicts a technological breakthrough in the production of good Y only? ○ Graph A ○ Graph B PPF2 PPF 1 ?arrow_forwarda) Draw a production possibilities frontier (PPF) for a society that produces two goods, guns and wheat. Suppose this society has two political parties, party R (who want a strong military) and party L (who want a smaller military). Show points on your diagram that party R and party L chooses. b) Show graphically whether your PPF will change if all the resources used for both the goods were equally suitable for production of guns and wheat? c) Assuming that b stands and if all the resources are used for the production of guns, 20 guns can be produced and if all the resources are used for production of wheat, 80 units of wheat can be produced, then what is the opportunity cost of producing one gun?arrow_forward
- Assume there are only two goods in the world: pizza and electric fans. Draw a production possibility frontier (PPF) illustrating the trade-off between the two (specific numbers are not needed – we are only looking for the basic shape of the PPF). On the same graph, draw new frontiers showing 1) what happens if a major plague reduced worldwide population significantly, and 2) if a machine is invented which doubles the number of fans that can be made in a day (but is irrelevant in the production of pizza).arrow_forwardSuppose 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_forwardPlease draw the two graphs with explanation, thank you Suppose that in the country of England, two goods can be produced on available agricultural land: wine and wool. Suppose that the opportunity costs of production are constant, so that the PPF is a straight line. Further, when all resources are devoted to wine production, England can produce 200 (thousand) barrels. When all resources are devoted to wool production, England can produce 400 (thousand) bushels of wool. Suppose that a bushel of wool could be traded for a barrel of wine, one-for-one, on the international market. Draw a diagram illustrating the original situation, and this new situation, with wool on the X-axis and wine on the Y-axis. Meanwhile, in the country of Portugal, wool and wine can also be produced according to a linear PPF. However, when all resources are devoted to production of wine, Portugal can produce 100 barrels, but when all resources are devoted to wool production, Portugal can produce 50 bushels.…arrow_forward
- Suppose 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_forwardQ1. Draw and explain a production possibilities frontier for an economy that produces milk and flowers. What happens to this frontier if a disease kills half of the economy’s cow? Q2. Imagine a society that produces “guns” (military goods) and “butter” (consumer goods). (1) Please draw a PPF for guns and butter, using the concept of opportunity cost. (2) Suppose that the society has two political parties, called the Hawks (who want a strong military and the Doves (who want a smaller military). Show a point on your PPF that the Hawks might choose and a point that the Doves might choose. Q3. An economy consists of three workers: Ronaldo, Messi, and Sonny. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, Ronaldo can either mow one lawn or wash one car; Messi can either mow one lawn or wash two cars; Sonny can either mow two lawns or wash one car. (1) Calculate how much of each service is produced under the following circumstances, which…arrow_forwardAcme supply is analyzing a Production Possibilities Curve that compares the production of wrenches( x-axis) to the production of pliers (Y-axis). If the slope of the PPC is 2, the opportunity cost of producing pliers in terms of wrenches isarrow_forward
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