Question

4. Utilize the following table to construct a Production Possibilities Curve and answer the following questions: Assume you are a plastic goods manufacturer and specializing in making plastic canteens and frisbees, but cannot decide on what output to allocate your resources towards a. Construct a Production Possibilities Curve utilizing the table. (2 Points) b. What is the opportunity cost for the producer for moving from Point C on the graph to point D? (3 Points) c. Due to it being the year 2020, an unforeseen disaster has occurred to your factory and your plant has lost a large amount of its machinery. Graph the change in the production possibilities curve. (3 Points) Point on Graph Canteens Frisbees Time Spent in Hours Product Made Time Spent in Hours Product Made A 0 0 4 31 B 1 3 3 28 С N 8 2 20 D 3 7 1 8 m 4 15 0 0

Answer 1

The Production Possibilities Curve depicts the amounts of two goods, in this case Canteens and Frisbees, that can be produced in the economy given the fixed resources. The curve shifts depending on a change in the resources available in the economy, leftward shift shows a reduction in the production possibility and rightwards depicting an increase. The given question is an exception to the standard shape of the PPC since it shows both increasing and decreasing opportunity costs.

Y Production Possibility Cure 1 (a) IA b. Frisbees 25 to S E 5 Is 20 25 30 Canteens → we can devine the above from the table - from A to C thre the cuve is cost. be seen concane to convex due to as the value the we Production Possibility Curre. points shape of Concave due to increasing marginal opportunity from points to E, a change in shape from decreasing marginal opportunity cost. (b) Opportunity costs can be explained of the next best alternative, it measures sacrifice forced to make economy no. of units of good sacrificed no. of units of good gained. Analysing from point c to D → of canteen sacrificed 12 units of frisbees sacrificed. i. This point can be seen as exception where buth goods are sacrificed during precluctan given the limited resouces in the Opportunity costs ④ 1 unit an

• opportunity cost (-) (+) 12 The (+) 12 (2) lost a the large part of ginen example gives the opportunity cost since both the goods being sacrificed. Que to an unforeseen disaster, the factory and plant has Sometimery thereby decreasing the production capacity since it has reduced the available resources for production the PPC will shift towards decreasing the quantity produced for both the goods. a result the left + A Frisbeles 0 3 Given that one X x Canteens → that al PPC was AB before the disaster occurred the PPC now due lă loss mar → shifts to original the total productive capacity reducing