Question

True or False?

1) A production possibilities frontier allows us to identify the opportunity cost of producing a particular good in an economy.

2) Consider the production possibilities frontier. The efficient points are the ones that are either on or outside the frontier.

3) When people work more hours, the production possibilities frontier shifts inwards.

4) When people become more productive, the production possibilities frontier shifts inwards because it takes less time to produce each unit.

5) The production possibilities frontier is "bowed out" when resources are specialized.

Fill in the blank:

1) In a given amount of time John can produce either 30 pounds of vegetables or 10 pounds of chicken. In the same amount of time George can produce either 25 pounds of vegetables or 5 pounds of chicken. In this simple economy if John and George decide to specialize and exchange with each other then we can expect one pound of chicken to trade for at least __?__ pounds of vegetables but not more than __?__ pounds of vegetables. Enter numerical values in each blank, rounded to two decimal places as necessary.  

2) In one hour John can produce either 3 units of good X or 6 units of good Y. He works an 8 hour day. If he wants to produce 12 units of good Y then how many units of good X can he produce? Enter a whole number. Round to the nearest whole number as necessary. __________

3) In one day Sam can produce 40 salads or 32 sandwiches. What is the opportunity cost of producing 1 sandwich? Enter a number rounded to two decimal places as necessary. ________

Answer 1

1)True. Since PPF shows different combination of two goods which an economy can produce by optimal utilisation of given resources and technology.

2)false. Points on PPF are efficient whereas points outside PPF are unachievable.

3)false. When peole work more there is overutilisation and PpF shifts outward

4)False PPF shift outward because more can be produced within the economy with the same resources.

5)False becasue all points on PPF represent specialization.