Question

3. Capitalizing on its natural advantages, Oregon focuses on tourism and pinot noir grapes.   The possible production combinations are given in the table below.

Year 2019 Production Possibilities in Oregon

Tourists serviced per year (thousands)	Grapes produced in tons per year (thousands)
100	0
85	37
70	47
55	55
40	61
0	65

1. Plot a graph of the production possibilities frontier for the economy.

2. Does the principle of increasing opportunity cost hold in this case? Please explain

3. Plot a point on the graph that you think might represent a possible consumption point (recall that the actual point chosen will depend not only on scarcity and opportunity cost, but also on peoples’ preferences).
4. Suppose half the grape pickers go on strike, reducing output by half. How would this affect the graph? Plot a point or redraw the graph to represent this development.
5.   Suppose that a new more productive pinot noir grape variety is developed that boosts grape production by 10%. Alter the table above to reflect this technological development and show on your graph.

Answer 1

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