A production possibilities table for two products, Consumption goods and Capital goods, is found below. Usual assumptions regarding production possibilities are implied. Consumption goods are measured in tons, and Capital goods are measured per unit. Combination Consumption goods Capital goods A 6 18 33 D 45 3 E 54 2 F 60 1 G 63 i. Sketch a production possibilities curve from the above information. ii. Using the information given in the above schedule, describe the concept of increasing opportunity cost. i. Suppose the economy is producing at a point inside the PPC. Give at least two reasons why this could occur. What could be done to move the economy to a point on the PPC? iv. “As compared to production combination F, the economy would experience higher growth rates in the future if production combination B is currently chosen." Comment this statement. v. Given the various possible production combinations of consumption and capital goods above, how does the society decides on the best possible production combination that is mostly wanted/valued by society (allocative efficiency)? 4, B.
A production possibilities table for two products, Consumption goods and Capital goods, is found below. Usual assumptions regarding production possibilities are implied. Consumption goods are measured in tons, and Capital goods are measured per unit. Combination Consumption goods Capital goods A 6 18 33 D 45 3 E 54 2 F 60 1 G 63 i. Sketch a production possibilities curve from the above information. ii. Using the information given in the above schedule, describe the concept of increasing opportunity cost. i. Suppose the economy is producing at a point inside the PPC. Give at least two reasons why this could occur. What could be done to move the economy to a point on the PPC? iv. “As compared to production combination F, the economy would experience higher growth rates in the future if production combination B is currently chosen." Comment this statement. v. Given the various possible production combinations of consumption and capital goods above, how does the society decides on the best possible production combination that is mostly wanted/valued by society (allocative efficiency)? 4, B.
Chapter2: Productions Possibilities, Opportunity Costs, And Economic Growth
Section: Chapter Questions
Problem 6SQP
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