...Assignment 1 – Unit 1 6/24/14 Question #1 – Graph This graphic is color coordinated with the brief explanations below. The economy is not able to perform or operate outside of the curve. The opportunity cost to manufacture and produce each pack of cigarette is equivalent to producing jars of baby formula. Fewer packs of cigarette produce can lead to more jars of baby formula being produced. This shows someone reading or interpreting the graph to conclude that the economy is not operating at its full efficiency. At the end of the curve not many jars of baby formula can be made seeing that the opportunity cost for cigarettes for baby formula is much lower. This is the production possibility frontier. Question #2 – Ebay Diamonds In observation through viewing an array of natural diamonds on Ebay, it is evident that Natural Diamonds are not in high demand based on the target market selected by Ebay. There were no competitive prices among the listings, but however it was interesting to examine the level of bids placed on different items listed. The price comparisons seems drastic, seeing that the first stone had a price tag of $3,000.00 and the second stone had the best listed bid of $50.00. In all essence, the stones where not exactly the same as it refers to size, shape and color, however there is a noticeable difference in the pricing for the stones listed deeming them as not being competitively price...
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...Dr. Mohammed Alwosabi Econ 140 – Ch.2 Notes on Chapter 2 PRODUCTION POSSIBILITIES FRONTIER This chapter reinforces the central themes of Chapter one by laying out the core economic model, the PPF, and using it to illustrate the concepts of scarcity, tradeoff and opportunity cost. It explains, with a model, the concepts of marginal cost and marginal benefit, introduces efficiency, and explains how we can expand production by accumulating capital and improving technology. The economic problem of allocating resources (making choices) in a situation of scarcity can be illustrated by explaining the concept of the production possibilities frontier (PPF). Production Possibilities Frontier (PPF) refers to the maximum combinations of goods and services an economy can produce efficiently using its available resources and technology within a given period of time. It is the boundary between the goods and services that can be produced from those that cannot. The PPF model is a graphical illustration with the following assumptions 1. The society has a fixed amount of available common resources. i.e., the same limited resources can be used to produce either of the goods. 2. The society has a fixed amount of technology 3. Full employment of resources 4. The choice is between producing two goods: Machines and Food. All other goods and services are assumed being the same (ceteris paribus). This assumption is to allow the use of simple graphical analysis. Note that these assumptions are...
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...Chapter - 01 Limits, Alternatives, and Choices: Chapter 1: #11, 12 Question 11 Explain how (if at all) each of the following events affects the location of a country’s production possibilities curve: a. The quality of education increases – Production possibilities will increase b. The number of unemployed workers increases – Production possibilities will decrease c. A new technique improves the efficiency of extracting copper from ore – Production possibilities will increase d. A devastating earthquake destroys numerous production facilities – Production possibilities will decrease Question 12 Suppose that, on the basis of a nation’s production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9000 pizzas. Relate this information to the following statement: “Through international specialization and trade, a nation can reduce its opportunity cost of obtaining goods and thus ‘move outside its production possibilities curve.’” Production possibilities curves dictate that individual nations are limited to output combinations that fall within the parameters of its possibilities curve. Specialization in an area has the same effect as higher education or technological advance, it increases outputs and there is economic growth. The international country specializes in a certain process and uses domestic resources to produce the item...
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...used to grow food crops. Suppose that Brazil‘s production possibilities for ethanol and food crops are given in the table. a. Draw a graph of Brazil‘s PPF and explain how your graph illustrates scarcity. [pic] Figure 2.1 shows Brazil‘s PPF. The production possibilities frontier itself indicates scarcity because it shows the limits to what can be produced. In particular, production combinations of ethanol and food crops that lie beyond the production possibilities frontier are not attainable. b. If Brazil produces 40 barrels of ethanol a day, how much food must it produce if it achieves production efficiency? If Brazil produces 40 barrels of ethanol per day, it achieves production efficiency if it also produces 3 tons of food per day. c. Why does Brazil face a tradeoff on its PPF ? Brazil faces a tradeoff on its PPF because Brazil‘s resources and technology are limited. For Brazil to produce more of one good, it must shift factors of production away from the other good. Therefore to increase production of one good requires decreasing production of the other good, which reflects a tradeoff. d. If Brazil increases its production of ethanol from 40 barrels per day to 54 barrels per day, what is the opportunity cost of the additional ethanol? When Brazil is production efficient and increases its production of ethanol from 40 barrels per day to 54 barrels per day, it must decrease its production of food crops from 3 tons per day to 2tons...
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...Homeworks should be submitted at the beginning of the class: 1. Homework 1: Due date: February 3, 2012 |Corn | |Cloth | |(pounds per | |(yards per | |month) | |month) | |3.0 |and |0 | |2.0 |and |2 | |1.0 |and |4 | |0 |and |6 | Part A: 1. Jane’s Island’s production possibilities are given in the table. What are Jane’s opportunity costs of producing corn and cloth at each output in the table? 2. Joe’s production possibilities are given in the table to |Corn | |Cloth | |(pounds per | |(yards per | |month) | |month) | |6 |and |0 | |4 |and |1.0 | |2 |and |2.0 | |0 |and |3.0 | the right. What are Joe’s opportunity costs of producing corn and cloth at each output in the table? 3. In problems 1 and 2, Jane’s Island produces and consumes 2 pounds of corn and 2 yards of cloth. Joe’s Island produces and consumes 2 pounds of corn and 2 yard of cloth. Now the islands begin to trade. a. What good does Jane sell to Joe and what good does Jane buy from Joe? b. If Jane and Joe divide the total output...
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...Student Services The Counseling Center Transfer Center Career Center Assessment Center ASO Page path My home / ► My courses / ► Fall 2013 / ► Pace Program / ► ECON_001_4910FA13 / ► 21 October - 27 October / ► Chapter 2 Practice Exercise - Resource Utilization (Not graded) Top of Form Question 1 Correct Mark 0.90 out of 1.00 Flag question Question text Our economy ______________ operates on its production possibility curve. Select one: a. Sometimes b. Never c. Usually d. Always Feedback Correct Marks for this submission: 1.00/1.00. Accounting for previous tries, this gives 0.90/1.00. Question 2 Correct Mark 0.90 out of 1.00 Flag question Question text Which statement is true? Select one: a. On the production possibilities frontier we have zero unemployment. b. To get out of a recession, we must produce at some point beyond our production possibilities frontier. c. On the production possibilities frontier 95 percent of the labor force is employed. d. To have economic growth, we must push the production possibilities frontier inward. Feedback Correct Marks for this submission: 1.00/1.00. Accounting for previous tries, this gives 0.90/1.00. Question 3 Correct Mark 0.80 out of 1.00 Flag question Question text The main reason our standard of living is so much higher than that of India and China is that we have more Select one: a. money. b. labor. c. capital. d. land. Feedback Correct Marks for this submission:...
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...Assignment 1 Questions Derrick Shoemaker 10/14/2012 MBA6008 - Global Economic Environment Assignment 1 Questions Question 5 page 21 a) Chart of production possibities, the production function shows the relationship between the quantity of inputs used in production and the quantity of output resulting from production. b) Economy is at "C" then automobile will be at "6" and forklifts would be at "19" Notice that the production possibility curve slopes downward from left to right that means that there is an inverse relationship between automobiles and forklifts. So this would be a representation of its shape. c) In the law of opportunity when the slop is steep there's a high opportunity cost for automobiles and low opportunity for forklifts. But that of that it being flat of 3 automobiles to 20 forklifts the opportunity for forklifts are higher to automobiles. d) 1. No 2. When technology improves, when more resources are discovered it will give more output with the same inputs. What I mean is that when technology improves the entire production possibility curve shifts outward. 3. As with technology this would also increase in international growth which would lead to growth in the production curve. This also would state that current production possibilities could outgrow it production curve. Income per year | | Savings per year | | | | 20,000 | | 1500 | 15,000 | | 1000 | 10,000 | | 500 | 5,000 | | 0 | 0 | | -500...
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...environment and how the extra money can be found to improve defence infrastructure. [12 marks] Opportunity cost is the cost of the next best alternative which is foregone when a choice is made. In this case a choice has been made to spend less on areas covered by DEFRA, presumably so that other departments do not have to suffer budget cuts because the Government has less money to spend on public services as a whole. For example, DEFRA has been run on £500M less between 2010 and the present and must save a further £300M. This would mean that the NHS budget, for instance, would not have to be cut. Although DEFRA provides a service and not a product, these changes can still be shown on a PPF diagram such as the one below. Production possibility frontiers show the maximum quantities of different combinations of output of two products, given current resources and the state of technology: DEFRA DEFRA A B A B Spending has reduced from point A to point B on the PPF, whilst spending on the NHS, for example, has not altered. Consequently, the maximum output of DEFRA has reduced, whereas that of the NHS has not. Spending has reduced from point A to point B on the PPF, whilst spending on the NHS, for example, has not altered. Consequently, the maximum output of DEFRA has reduced, whereas that of the NHS has not. NHS NHS If the budget is reduced, fewer workers can be employed permanently. This means that the work that is yet to be done on other projects...
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...Draw a linear production possibilities frontier. Draw a bowed production possibilities frontier. Compute opportunity costs from a production possibilities frontier. Identify feasible and infeasible and efficient and inefficient points from a production possibilities frontier. Identify comparative and absolute advantage from a production possibilities frontier. Describe trade based on comparative advantage. Identify positive and normative statements. Question: Two important industries on the island of Bermuda are fishing and tourism. According to data from the World Resources Institute and the Bermuda Department of Statistics, in the year 2000 the 307 registered fishermen in Bermuda caught 286 metric tons of marine fish. And the 3,409 people employed by hotels produced 538,000 hotel stays (measured by the number of visitor arrivals). Suppose that this production point is efficient in production. Assume also that the opportunity cost of one additional metric ton of fish is 2,000 hotel stays and that this opportunity cost is constant (the opportunity cost does not change). a. If all 307 registered fishermen were to be employed by hotels (in addition to the 3,409 people already working in hotels), how many hotel stays could Bermuda produce? b. If all 3,409 hotel employees were to become fishermen (in addition to the 307 fishermen already working in the fishing industry), how many metric tons of fish could Bermuda produce? c. Draw a production possibility frontier for Bermuda...
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...the year 2025 have longer life span than the people living in the year 2000. This basically goes to show that there will be more of the elderly than the infants in the year 2025. Many things alter when societies modernize, but it is not clear as to which factors are the direct cause of the declining birth rates, or the increasing life spans. There have been no shortage of reasons proposed, but unfortunately, only a handful is convincing enough to be accepted by the norm (Foster & Shrira 2009). Decreasing birth rates could very well be associated with the idea that children can be financial burdens to their parents as the cost of raising a child exceeds what the child could ever contribute, even in past societies. A more reasonable possibility, however, is that parents have begun to limit the size of their family so that more resources can be allocated to each child (Foster & Shrira 2009). This again brings the reasoning back to the ever-increasing costs of raising children. For example, decent education is now perceived to be an important component of a good life, so parents are now more likely to encourage their child to pursue education in prestigious colleges and universities – all which would pretty much add to the cost of raising their child (Foster & Shrira 2009). The increasing life spans, on the other hand, could be associated with changes in the shape of the survival curve, which can be characterized by the decline in premature mortality (Basheer 2010). ...
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...study of the production possibilities frontier and opportunity cost. This tutorial goes back to the basics. You are a hunter-gatherer with only so much time to hunt or gather. How do you allocate your time and energy to maximize you happiness? This is what we try to understand through our study of the production possibilities frontier and opportunity cost. This tutorial goes back to the basics. You are a hunter-gatherer with only so much time to hunt or gather. How do you allocate your time and energy to maximize you happiness? This is what we try to understand through our study of the production possibilities frontier and opportunity cost. This tutorial goes back to the basics. You are a hunter-gatherer with only so much time to hunt or gather. How do you allocate your time and energy to maximize you happiness? This is what we try to understand through our study of the production possibilities frontier and opportunity cost. This tutorial goes back to the basics. You are a hunter-gatherer with only so much time to hunt or gather. How do you allocate your time and energy to maximize you happiness? This is what we try to understand through our study of the production possibilities frontier and opportunity cost. This tutorial goes back to the basics. You are a hunter-gatherer with only so much time to hunt or gather. How do you allocate your time and energy to maximize you happiness? This is what we try to understand through our study of the production possibilities frontier and...
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...This assignment explores production possibilities principles in a fixed and variable economy. This assignment also explores market equilibrium and how price ceilings and floors can affect that balance. Production possibilities table and curve for consumer goods (automobiles) and capital goods (forklifts). Chapter 1: Problem 5, a through d. | Production Alternative | Type of Production | A | B | C | D | E | Automobiles | 0 | 2 | 4 | 6 | 8 | Forklifts | 30 | 27 | 21 | 12 | 0 | The assumptions in the above table and curve are based on two products that can be produced with a specific set of resources, fixed technology and also assuming full employment (McConnell, Brue & Flynn, 2012). If the economy is at point C, the economy is producing 4 automobiles and 21 forklifts. The cost of producing one more automobile would be 5 forklifts. If we increase the automobiles from 4 to 5, the forklifts decrease from 21 to 16, a loss of 5. If the economy is at point C on the production possibilities graph and the forklifts increase by 1 quantity, the cost would be .33 automobiles. If we increase the forklifts from 21 to 22, the automobiles decrease from 4 to 3.66. In this example, the law of increasing opportunity cost is characterized by the shape of the curve. The curve is bowed out from the origin of the graph, (McConnell, Brue & Flynn, 2012, p13.) This indicates that as the production of one of the goods increases the production of the corresponding good...
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...does the production possibilities frontier illustrate scarcity? The unattainable combinations of production that lie beyond the PPF illustrate the concept of scarcity. There simply are not enough resources to produce any of these combinations of outputs. Additionally, while moving along the PPF to increase the production of one good requires that the production of another good be reduced, which also illustrates scarcity. 2. How does the production possibilities frontier illustrate production efficiency? The combinations of outputs that lie on the PPF illustrate the concept of production efficiency. These points are the maximum production points possible and are attained only by producing the goods and services at the lowest possible cost. Any point inside the frontier reflects production where one or both outputs may be increased without decreasing the other output level. Clearly, such points cannot be production efficient. 3. How does the production possibilities frontier show that every choice involves a tradeoff? Movements along the PPF frontier illustrate that producing more of one good requires producing less of other good. This observation reflects the result that a tradeoff must be made when producing output efficiently. 4. How does the production possibilities frontier illustrate opportunity cost? The negative slope of the production possibility curve illustrates the concept of opportunity cost. Moving along the production possibility frontier,...
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...------------------------------------------------- Chapter 2—Production Possibilities Frontier Framework MULTIPLE CHOICE 1. Points outside (or beyond) the PPF are a. | attainable. | b. | unattainable. | c. | efficient. | d. | inefficient. | ANS: B PTS: 1 DIF: Difficulty: Easy NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost KEY: Bloom's: Comprehension 2. Which of the following statements is true? a. | In a world of efficiently used scarce resources, more of one good necessarily means less of some other good. | b. | The law of increasing opportunity costs assumes that all people have the same ability to produce goods. | c. | Efficiency implies that it is impossible to get more of one good without getting less of another. | d. | Even if a country has unemployed resources, it can still be operating on its production possibilities frontier (PPF). | e. | a and c | ANS: E PTS: 1 DIF: Difficulty: Challenging NAT: BUSPROG: Analytic LOC: DISC: Efficiency and equity KEY: Bloom's: Comprehension 3. Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country's a. | production possibilities frontier (PPF) after the war has probably shifted to the right compared to its PPF prior to the war. | b. | PPF after the war has probably shifted to the left compared to its PPF prior to the war. | c. | PPF after...
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... b) The PPF curve illustrates the concept of increasing opportunity costs with its changing slope. This causes the curve to be concave toward the origin. It occurs because society produces more and more of Grains; it must give up increasing amounts of Airplanes due to the fact that resources are specialized. If resources could be used equally efficiently to produce all things, opportunity costs would be constant and the production possibilities curve would be a straight line graph showing alternative production possibilities. c) Q5 a. Figure shows Brazil’s PPF. The production possibilities frontier indicates scarcity because it shows the limits to what can be produced. In particular, production combinations of ethanol and food crops that lie outside the production possibilities frontier are not attainable. b. If...
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