ECONOMICS
1010 A
J. ALLEN
SSI, 2007
PROBLEM
#1
Given the following production possibilities table (curve) for an entire economy :
MANUFACTURED GOODS
5
4
3
2
1
0
AGRICULTURAL GOODS
0
5
9
12
14
15
1.
Draw the PP Curve.
2.
If 9 units of agricultural goods are being produced, how many units of manufactured goods can
be produced? _________________
3.
What is the (marginal) opportunity cost of the second unit of manufactured goods?
_____________
4.
If production is 5 units of agricultural goods and 3 units of manufactured goods, what is the
(marginal) opportunity cost of the fourth unit of manufactured goods? _____________________
5.
Why?
6. Technology exactly doubles the efficiency of resources in producing manufactured goods, but has
no effect on agricultural production. Write out the new production possibilities table and draw the
new PPC graph.
7. What is now the (total) opportunity cost of the first two units of manufactured goods? __________