Assignment 1 Use the following table, graph, and your reading material to answer
ID: 1146867 • Letter: A
Question
Assignment 1 Use the following table, graph, and your reading material to answer the questions: Forklifts 27 21 12 35 30B 25 20 15 10 51 0 0 2 4 6 8 10 Autos a. Upon what specific assumptions is this production possibilities curve based? b. If the economy is at point C, what is the cost of 1 more automobile? Of 1 more forklift? Explain how the production possibilities curve reflects the law of increasing opportunity costs. c. If the economy characterized by this production possibilities table and curve were producing 3 autos and 20 forklifts, what could you conclude about its use of its available resources? d. What would production at a point outside the production possibilities curve indicate? What must occur before the economy can attain such a level of production?Explanation / Answer
a). PPC is based on the following assumptions
1. Increasing opportunity costs.
2). Full and Optimal utilization of resources
3). The point of time is given, and no extra resouces are added at that particular point in time.
b). The cost of one more automobile is giving up 5 units of forlift. The PPC exhibits the law of increasing opportunity cost as can be observed from shape of the curve(concave). This means that more and more of forklifts are given up to gain one more unit of automobiles.
c). The economy will be producing inside the PPC if it was producing 3 autos and 20 forklifts. Thus, the economy will not be functioning at the most efficient level of output.
d). A point outside the PPC indicates a point where production is possible only with an additional presence of more resources in an economy. There should be technological advancement or an increase in the level of resources available in the economy in order to reach a point outside the PPC.