Unit labour requirement for beer, in hours: ALB = 3 Unit capital requirement for beer, in hours: aKB = 6 There are 1,000 man-hours of labour available and 1,200 machine-hours of capital available. Holland begins with no trade. Explain which good is more capital intensive and show how you calculate this. Draw the production possibility frontier, with cars on the y-axis and beer on the x- axis, and label each frontier line. Shade the area of possible production. Indicate at which point on the PPF both factors are being fully used. What are the implications of being away from this point? To the right of the point you have indicated, what happens to the opportunity cost of producing more beer? Explain why this is and calculate the opportunity cost of increasing beer production on both sides of the point.

Unit labour requirement for beer, in hours: ALB = 3 Unit capital requirement for beer, in hours: aKB = 6 There are 1,000 man-hours of labour available and 1,200 machine-hours of capital available. Holland begins with no trade. Explain which good is more capital intensive and show how you calculate this. Draw the production possibility frontier, with cars on the y-axis and beer on the x- axis, and label each frontier line. Shade the area of possible production. Indicate at which point on the PPF both factors are being fully used. What are the implications of being away from this point? To the right of the point you have indicated, what happens to the opportunity cost of producing more beer? Explain why this is and calculate the opportunity cost of increasing beer production on both sides of the point.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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