Production possibilities
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Suppose Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources for catching fish.
Draw a ppc with potatoes on the x-axis and fish on the y-axis, and illustrate these options, showing points A-F. Can Atlantis produce 500 lbs of fish and 800 lbs of potatoes? Explain. Where would this point lie relative to the ppc? What is the opportunity cost of increasing the annual output of potatoes from 600 to 800 lbs? What is the opportunity cost of increasing the annual output of potatoes from 200 to 400 lbs? Explain why the answers to parts c and d are not the same. What does this imply about the ppc?
Why is the production possibility frontier concave? Be sure to explain economic intuition behind that fact. Suppose the economy is currently producing 2000 cars and 30,000 gallons of milk. What is the opportunity cost of producing additional 20,000 gallons of milk? The synthetic production of Bovine Growth Hormone (BGH) allows dairy farmers to get twice as much milk from each cow. In terms of this production possibility frontier, this means that this economy can now produce twice as much milk at each level of car output. With the economy currently producing 2000 cars, Jerry claims that the development of BGH allows the economy to produce more milk and more cars. Do you agree? Explain carefully, using an appropriate diagram to illustrate your answer Directory: SiSFiles -> Schools Schools -> Ap u. S. History presidents list the Young Republic, 1788-1815 Schools -> Introduction Schools -> Cutting Greenhouse Gases Global warming Schools -> Birth of a Monster on the left hand side of the page. Read all the interesting information as you make your way down to the chart which outlines the steps in hurricane formation. Hurricane Formation Schools -> History of the American Automobile Schools -> Exploring Hurricanes Schools -> Famous Alabamians: Athletes Schools -> Hubble Space Telescope Download 72.02 Kb. Share with your friends:
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