Question

1. The table below shows the production possibilities schedule for an economy.

Production Alternatives Capital Goods Consumers Good

A 0

1300

B 20 1200

C 45 900

D 60 600

E 70 350

F 75 0

a. Putting capital goods on the horizontal axis and consumer goods on the vertical axis, graph the production possibilities curve for the economy.

Answer

b. If the economy is producing at alternative B, what is the opportunity cost to it of producing at alternative C instead?

Answer:

c. If the economy is producing at alternative C, what is the opportunity cost to it of producing at alternative D instead?

Answer:

d. If the economy is producing 40 units of capital goods and 600 units of consumer goods, what is the opportunity cost of producing an extra 30 units of capital goods.

Answer:

Which point, B or C, would lead to higher economic growth? Explain your answer.

Answer:

Answer 1

A)

B)The opportunity cost =change in quantity of food / change in quantity of capital=(900-1200)/(45-20)=-300/25=-12 food

C) Opportunity cost of producing D=-300/15=-20

D) Because economy can produce 60 capital with 600 food. ,Which means some resources are not utilizing.

So Producing additional 20 capital will have zerp opportunity cost .

Additional 10 will have opportunity cost=-250/10=-25

So opportunity cost=-25

E) because higher economic growth required higher level of capital,so in long run to reach higher growth economy need more capital. So point C will lead to higher growth