Question

This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the output per hour worked in Home for each of the two goods

CHOCOLATE	WINE
6 pounds	2 gallons

Use the line drawing tool to draw the production possibilities frontier for chocolate and wine in Home given that there are 20 total labor hours (L) available. Label this curve PPC.

Carefully follow the instructions and only draw the required object.

Answer 1

Ans) PPC shows possible combination of goods that can be produced in an economy given the available resources.

PPC is bowed outwards as it shows increasing opportunity cost. However, straight line PPC is also drawn, showing constant opportunity cost. Here we can make any as nothing about opportunity cost is given.

If all the labour and time is devoted to chocolate then in 20 hrs, 120 pounds chocolates (6×20) can be produced.

If all the time and labour is devoted in making wine then in 20hrs, 40 gallons wines (2×20) can be produced.

I have drawn two PPC as I don't know which axis is assigned to which good. So, you can draw accordingly.

(Kindly rate. Thank you. Stay safe.)