Production Possibilities Frontier
Production Possibilities Frontier
Worksheet
1. Farmer Brown has four fields that can produce corn or tobacco. Assume that the trade-off between corn and tobacco within each field is constant. The maximum yields are given in this table:
|Field |A |B |C |D |
|Corn |40 |30 |20 |10 |
|Tobacco |10 |20 |30 |40 |
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a. Draw Farmer Brown's ppf.
b. To be on the ppf, what conditions must hold true?
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c. Brown is currently producing only corn: if he wants to produce some tobacco, in what order would he switch his fields from corn to tobacco production? What law does this represent? Explain.
d. If Farmer Brown wishes to produce more of either corn or tobacco, or both, what are some options he should put into operation?
|Corn |Tobacco |Both |
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2. The following data give the production possibilities of an economy that produces two types of goods, cloth (horizontal axis) and wheat (vertical axis).
|Production Possibilities |Cloth |Wheat |
|A |0 |105 |
|B |10 |100 |
|C |20 |90 |
|D |30 |75 |
|E |40 |55 |
|F |50 |30 |
|G |60 |0 |
a. Graph the production possibilities frontier.
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b. Explain why Point D is efficient while Point H is not.
c. Indicate by drawing an 'X' where production is unattainable. To achieve this currently unattainable production combination, what must happen (two possible answers)?
d. Calculate the per-unit opportunity cost of an increase in the production of cloth, or the production of wheat, in each of the following cases.
|From Point A to Point B? | |
|From Point F to Point E? | |
|From Point C to Point D? | |
e. In each of the following cases, explain what will happen to the production possibilities frontier.
|There is an new tractor invented which improves wheat farming | |
|techniques. | |
|The productivity of all workers increase | |
|A new technology makes it more efficient to cut wheat and make cloth| |
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