Answer to Question #314558 in Macroeconomics for mahmoud josph

Question

The following data show the different combinations of coffee and cars that can be produced by an economy, given a particular amount of resources, and a particular state of technology. Draw the corresponding production possibility frontier to answer the questions below:

Type of Production Production Alternatives

A B C D E F

Coffee (tons) 100 80 60 40 20 0

Cars (units) 0 8 12 15 17 18

1.Given the production possibility frontier above,can the economy produce the combination of 50 tons of coffee and 5 units of cars?What does this combination suggest about the use of the resources?Are they fully utilized?

2.Given the production possibility frontier above,can the economy produce the combination of 80 tons of coffee and 12 units of cars,and why?

3.What is the opportunity cost of increasing coffee production from 40 to 60 tons per year,assuming that resources are fully utilized?

Answer 1

1.Yes, the economy can produce this combination, since the point will be located inside and the production capacities cannot be fully utilized

2.In this case, no, as the trchka will be out of schedule, and the economy will not have enough capacity to produce 4 extra cars.

3.In this case, the opportunity cost is equal to 3 cars, i.e. the economy will have to give up the production of 3 cars in order to produce an extra 20 tons of coffee.