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production possibilities frontier

    Using the production possibilities frontier below, complete the following questions.

 

                                               image.png

 

(a)   Calculate the opportunity cost of point A move to point B.                           (2 marks)

 

(b)   Calculate the opportunity cost of point C move to point D.                           (2 marks)

 

(c)   Illustrate and explain what would happen to the production possibilities frontier if there were a technological breakthrough in producing tubas.                   (4 marks)


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Answer #1

Production at Point A - 4 million automobiles & 0 cameras

Production at Point B - 3 million automobiles & 3 million cameras

Production at Point C - 2 million automobiles & 4 million cameras

Production at Point D - 1 million automobiles & 2 million cameras

a. Move from point B to point C

The nation produces 1 million cameras more but loses out 1 million automobiles

Therefore, the opportunity cost of moving from B to C = 1 million automobiles

b. Move from point B to point A

The nation produces 1 million automobiles more but loses out 3 million cameras

Therefore, the opportunity cost of moving from B to A = 3 million cameras

c. Move from point D to point B

The nation gains 2 million automobiles and 1 million cameras. The nation moves from an inefficient production scenario to an efficient one and hence, there is no opportunity cost involved in moving from point D to point B.


answered by: ANURANJAN SARSAM
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