mircoeconomics question

Jul 12th, 2015
Anonymous
Category:
Accounting
Price: $5 USD

Question description

Use the following graph to address questions 4 and 5 below. Consider a production possibilities curve (PPC) for an economy that produces farm goods and factory goods. It can produce the combinations listed in the table. Notice if the economy produces more farm goods, it will give up factory goods resources.

Point on PPC

Farm goods

Factory goods

b

10

700

c

20

650

e

60

400

f

70

120

  1. If the economy wanted to move from point b to c, what would be the opportunity cost of increasing farm production by 10 tons? Your answer should be in terms of factory goods.
  2. Compare the movement from b to c and from e to f. What do you notice about opportunity cost? Explain.

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