Q 1: Below is a production possibilities table for consumer goods and capital goods : Production Alternatives Capital Goods Consumer Goods A 0 70 B 3 65 C 6 55 D 9 40 E 12 20 F 15 0 a. Show these data graphically. Upon what specific assumptions is this production possibilities curve based? b. If the economy is at point C, what is the cost of one more unit of capital good? Of one more unit of consumer good? Explain how the production possibilities curve reflects the law of increasing opportunity costs. c. If the economy characterized by this production possibilities table and curve were producing 7 units of capital goods and 45 units of consumer goods, what could you conclude about its use of its available resources? d. What would production at a point outside the production possibilities curve indicate? What must occur before the economy can attain such a level of production? e. Assume consumer good are bread and cookies here. What happens to this frontier if disease kills half of the economy’s hens and cows? Q 2(a): How does self-interest help achieve society’s economic goals? Why is there such a wide variety of desired goods and services in a market system? In what way are entrepreneurs and businesses at the helm of the economy but commanded by consumers? b. Why is private property, and the protection of property rights, so critical to the success of the market system? c. How the market system decides what to produce, how to produce it, and who obtains it. Q 3: How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts? Use supply and demand diagrams to verify your answers. i. Supply decreases and demand is constant. ii. Demand increases and supply increases. iii. Supply increases and demand decreases. b. Explain why the price in competitive markets settles down at the equilibrium intersection of supply and demand. Explain what happens if the market price starts out too high or too low. c. Consider the following events: Scientists reveal that consumption of oranges decreases the risk of Corona Virus and, at the same time, farmers use a new fertilizer that makes orange trees more productive. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.
Q 1: Below is a production possibilities table for consumer goods and capital goods : Production Alternatives Capital Goods Consumer Goods A 0 70 B 3 65 C 6 55 D 9 40 E 12 20 F 15 0 a. Show these data graphically. Upon what specific assumptions is this production possibilities curve based? b. If the economy is at point C, what is the cost of one more unit of capital good? Of one more unit of consumer good? Explain how the production possibilities curve reflects the law of increasing opportunity costs. c. If the economy characterized by this production possibilities table and curve were producing 7 units of capital goods and 45 units of consumer goods, what could you conclude about its use of its available resources? d. What would production at a point outside the production possibilities curve indicate? What must occur before the economy can attain such a level of production? e. Assume consumer good are bread and cookies here. What happens to this frontier if disease kills half of the economy’s hens and cows? Q 2(a): How does self-interest help achieve society’s economic goals? Why is there such a wide variety of desired goods and services in a market system? In what way are entrepreneurs and businesses at the helm of the economy but commanded by consumers? b. Why is private property, and the protection of property rights, so critical to the success of the market system? c. How the market system decides what to produce, how to produce it, and who obtains it. Q 3: How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts? Use supply and demand diagrams to verify your answers. i. Supply decreases and demand is constant. ii. Demand increases and supply increases. iii. Supply increases and demand decreases. b. Explain why the price in competitive markets settles down at the equilibrium intersection of supply and demand. Explain what happens if the market price starts out too high or too low. c. Consider the following events: Scientists reveal that consumption of oranges decreases the risk of Corona Virus and, at the same time, farmers use a new fertilizer that makes orange trees more productive. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.
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Related questions
Below is a production possibilities table for consumer goods and capital goods:
| Alternatives | Capital goods | Consumer goods |
| A | 0 | 70 |
| B | 3 | 65 |
| C | 6 | 55 |
| D | 9 | 40 |
| E | 12 | 20 |
| F | 15 | 0 |
a. Show these data graphically.
b. Upon what specific assumptions is this production possibilities curve based?
Problem 1
Below is a production possibilities table for consumer goods (food) and capital goods (machinery). Graph the data using Excel and then answer the following questions.
|
A |
B |
C |
D |
E |
F |
|
|
FOOD |
0 |
10 |
20 |
30 |
40 |
50 |
|
MACHINES |
150 |
140 |
120 |
90 |
50 |
0 |
(a) What are the specific assumptions that underlie the production possibilities curve?
(b) What would be the cost of more food if the economy is at point C? What would be the cost of producing more machinery? How does the shape of the production possibilities curve reflect the law of increasing opportunity costs?
(c) What if this hypothetical economy were producing only 9 food and 130 machines and it was depicted by this production possibilities table and curve? What conclusions could be drawn about this economy's resource utilization?
(d)Can this economy produce outside its current production possibilities? How can technological changes affect the production possibilities curve? How can international trade permit consumption above its production possibilities curve?
