Production possibility frontier and opportunity cost

Assignment Help Macroeconomics

Reference no: EM1312981

Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

Maximum annual Output options	Quantity of potatoes (pounds)	Quantity of fish (pounds)
A	1000	0
B	800	300
C	600	500
D	400	600
E	200	650
F	0	675

a) Draw a production possibility frontier with potatoes on the horizontal axis and fish on the vertical axis illustrating these options, showing points A-F.

b) Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes? Explain. Where would this point lie relative to the production possibility frontier?

c) What is the opportunity cost of increasing the annual output of potatoes from 600 to 800 pounds?

d) What is the opportunity cost of increasing the annual output of potatoes from 200 to 400 pounds?

e) Can you explain why the answers to parts c and d are not the same? What does this imply about the slope of the production possibility frontier?

Reference no: EM1312981

Questions Cloud

Internal torque acting at the cross section : A uniform shaft, fixed at one end & free at other, is twisted so that each cross - section rotates through an angle proportional to the distance from the fixed end. If the shaft is released from rest in this position, determine the s

Significance level and power of a test : The significance level of a statistical test is equal to the probability that the null hypothesis is true.

Formulation of drugs into medicines : It is not normal to administer a pure drug to a patient. Almost all the drugs are administered in form of a medicine. A medicine is a mixture of one or more drugs combined or formulated with the other inactive materials known as excipients.

Objective questions based on momentum and force : Objective questions based on momentum and force.

Production possibility frontier and opportunity cost : Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced.

Describe capital budgeting decision based net present value : Describe Capital budgeting decision based on net present value

Type error and power of a test : Would the null hypothesis be accepted or rejected in this case?

Evaluate the economic order quantity : Evaluate the economic order quantity for the spice in terms of 10 pound bags - Find the reorder point

Compute present value and the internal rate : Compute present value and the internal rate or return for the new product line - outlay for working capital will be recovered at the end of six year. Aunt Sally's tax rate is 34% and the firm requires 16% return.

User Account

All Pages