Question

Imagine an economy that only produces bread and flowers. The possible production combinations are given below.

Bread	Flowers	Opportunity cost of producing flowers (in bread)
500	0
450	1
350	2
200	3
0	4

  

1. Draw the production possibility frontier for bread and flowers based on the numbers in the table below. Highlight an attainable, unattainable and efficient point in your graph (2 points)

2. What are the opportunity costs of producing flowers in terms of bread? Fill in the missing numbers in the above table in column 3. (1.5 points)

Answer 1

Opportunity cost = Number of units sacrificed / Number of units gained

Bread	Flowers	Opportunity cost of producing flowers (in bread)
500	0	***
450	1	50/1= 50
350	2	100/1= 100
200	3	150/1= 150
0	4	200/1= 200

All the points are on the PPC which denotes efficient utilisation or optimum of resources. [Any point outside PPC is unattainable and any point inside the PPC denotes inefficient utilisation of resources)

All the points are Efficient, as it is on the PPC