Question

3. BONUS. A production possibility frontier (curve). Bill Swartz has four fields spread out over a hillside. He can grow either wheat or potatoes in any of the fields, but the low fields are better for potatoes and the high ones are better for wheat. Here are some com- binations of wheat and potatoes that he could produce: Number of Fields Number of Fields Total Tons of Potatoes Total Tons of Wheat Used for Potatoes Used for Wheat Produced Produced All 4 None 900 Lowest 3 Highest 1 800 300 Lowest 2 Highest 2 600 700 Lowest 1 Highest 3 400 900 None All 4 1,000 a. Use these data to draw a production possibility frontier (curve) for wheat and potatoes. Place potatoes on the y axis and wheat on the x axis. b. What is the opportunity (additional) cost of a ton of wheat, stated in terms of potatoes, when the farmer converts the highest field to wheat production? (How many tons of potatoes are given up to get one ton of wheat?) c. What is the opportunity cost of wheat as more and more fields are switched to wheat? (three calculations required)

Answer 1

a) PPC is drawn as under ----

NOTES: PRODUCTION POSSIBILITY FRONTIER 900 POTATOES (TONS 600 400 302 200 JE x 7X lowo 1 100 200 6w 30 40 50 to go ao WHEAT April 2009

Combinations	potatoes(P)	wheat(W)	∆P	∆W	MOC(∆P/∆W)
A	900	0	---	--	---
B	800	300	100	300	•33
C	600	700	200	400.	•50
D	400	900	200	200	1
E	0	1000	400	100	4

b) 0•33 ton of potatoes are given up to get one ton of wheat, when he converted the highest field to wheat production.

( See the calculations of Marginal Opportunity Cost ( MOC) in the above table)

C)Opportunity cost of wheat when more and more fields are switched to wheat-----

0•33 (3 lowest and 1 highest field)

0•5 ( 2 lowest and 2 highest)

1. ( 1lowest ,3 highest)

4. ( 4 highest fields)

( Table stated above shows it in MOC)