Question

Please just answer d, e, f

1. Consider an economy consisting of three provinces in Canada with their technology and input specified in the table below. In what follows, assume that the economy switches producers in the right order except in items e), f) and k)

a) How much is PEI’s opportunity cost of a peach?

b) Between Alberta and Ontario, which one is better at producing Mussels and why?

c) Assume that mussel production requires labour input only. Determine Ontario’s returns to scale of mussel production.

d) With peaches on the x- axis, sketch this economy’s PPF.

e) Sketch the set of outputs that can be produced if they switch the production in the reverse order than d)

f) Is the set in e) a PPF? Explain you answer.

	PEI	Alberta	Ontario
Peaches	1 Peach / 10 Workers	1 Peach / 5 Workers	1 Peach / 1 Worker
Mussels	1 Mussel / 1 Worker	1 Mussel / 5 Workers	1 Mussel / 5 Workers
Input	10 Workers	20 Workers	10 Workers

Answer 1

1- PEI opportunity cost of peach is 10 Mussels becausio ge to produce 1 peach it has to sacrifice 10 Mussels.

2- Alberta is better at producing Mussels as it has input of 20 workers and uses 5 to produce 1 mussle while Ontario has 10 workers and also uses 5 workers to produce 1 mussel. so the input ratio is 1:2 for Ontario and 1:4 for Alberta  respectively. So the opportunity cost is less for Alberta to produce Mussels so it is better at producing mussels.

3- Ontario’s returns to scale of mussel production- 2 mussels

4-