In 2017, Nepal’s production of rice and machinery was published by the Nepal Bureau of Statistics (NBS) as indicated by the table below: Production in Nepal Position P Q R S T U V W X Y Z Rice (1000 tons) 0 10 26 37 45 50 55 59 66 77 80 Machinery (units) 90 89 85 80 75 70 65 60 50 30 0 Use the NBS production table and production possibility frontier to answer the following questions: A. Name positions B, V and D. Also, as indicated in the table, supposing Nepal is operating at level T, what is the opportunity cost of producing 10,000 more tons of rice? B. Use the graph below to answer the questions that follow: B1: Suppose Nepal begins to manufacture fertilizers. Explain the impact of the discovery of fertilizers on Nepal’s economy using one of the PPF above. B2: Also, supposing there is a discovery of steel in Nepal, explain the impact of steel on the economy of Nepal using one of the PPF above. B3: Finally, the Minister of Finance in Nepal advices the World Bank that in order to increase rice production and machinery, each sector requires USD 50 billion, or a total of 100 billion. This 100 billion is made available by the World Bank. Explain the impact of these 100 billion budgetary allocations to the economy of Nepal. Use one of the PPF above.
In 2017, Nepal’s production of rice and machinery was published by the Nepal Bureau
of Statistics (NBS) as indicated by the table below:
Production in Nepal
Position P Q R S T U V W X Y Z
Rice (1000 tons) 0 10 26 37 45 50 55 59 66 77 80
Machinery
(units)
90 89 85 80 75 70 65 60 50 30 0
Use the NBS production table and
following questions:
A. Name positions B, V and D. Also, as indicated in the table, supposing Nepal is
operating at level T, what is the
of rice?
B. Use the graph below to answer the questions that follow:
B1: Suppose Nepal begins to manufacture fertilizers. Explain the impact of the
discovery of fertilizers on Nepal’s economy using one of the PPF above.
B2: Also, supposing there is a discovery of steel in Nepal, explain the impact of
steel on the economy of Nepal using one of the PPF above.
B3: Finally, the Minister of Finance in Nepal advices the World Bank that in
order to increase rice production and machinery, each sector requires USD
50 billion, or a total of 100 billion. This 100 billion is made available by the
World Bank. Explain the impact of these 100 billion budgetary allocations
to the economy of Nepal. Use one of the PPF above.
- The point on PPF shows the efficient uses of resources, therefore point V represents efficient utilization of resources.
Point B represents the underutilization of resources therefore it is inefficient.
Point D represents greater output combination of both rice and machines compared to point V but as it is above the PPF so due to the constraint of resources therefore it is also not achievable.
At point T, Nepal is producing 45,000 tons of rice and 75 units of machines and if it wants to increase 10,000 tons of rice production then it has to sacrifice 10 units of machines, therefore 10 units of machines are the opportunity cost of 10,000 tons of machines.
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