Question

2. In ancient days, a tribe of natives on the mythical continent of Atlantis were able to produce two commodities to eat. They could harvest fish from the sea and they could grow a form of wild oats. Table 5 and Graph 1.a. both show the maximum annual output combinations of fish and wild oats that could be produced by the natives of Atlantis.
Table 5

Maximum annual output options	Kilograms of fish	Bushels of wild oats
1	7,000	0
2	6,000	300
3	5,000	500
4	4,000	625
5	3,000	710
6	2,000	775
7	1,000	825
8	0	850

Graph 1.a.

1. Could the Atlantis tribe have produced 800 bushels of wild oats and 5,000 kilograms of fish at the same time? Explain your answer. Where would this point lie relative to the production possibility frontier?
2. Using Table 5, what would have been the marginal opportunity cost of increasing the annual output of wild oats by 200 bushels, from 300 bushels up to 500 bushels?
3. Using Table 5, what would have been the marginal opportunity cost of increasing the annual output of wild oats by 200 bushels, from 625 bushels up to 825 bushels?
4. Why are the marginal opportunity costs for two similar batches of 200 bushels of wild oats not the same? Explain. What does this difference imply about the shape of the Atlantis tribe’s production possibility frontier curve?

Answer 1

Graph of PPF

a) no, this combination can't be attained,

Bcoz with 5000 fish, only 500 pata could be produced

This point will lie outside PPF

B) if oats rise by 200, from 300 to 500,

Marginal opportunity cost =10000 kilogram of fish

C) from 625 to 825,

Marginal opportunity cost = (4000-1000)

=3000 kilogram of fish

D) Marginal opportunity cost is rising , bcoz resources are Constant , as we produce more & more Oats, less & less Production of fish happens

Thus shape of PPF will be Concave