Please help with this question I am having a bit of difficulty on. I will be sur
ID: 2428937 • Letter: P
Question
Please help with this question I am having a bit of difficulty on. I will be sure to leave a review. Thank you in advance!
1. sofas 1000 900 A 800 t 700 600B 500 400 300 ? 200 100 T 100 200 300 400 500 600 700 800 900 cars Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of three sofas is: (Hint- think in terms of cars- to produce 3 sofas, how many cars do they give up) a. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of two cars is: b. c. Is point B efficient? If this economy produces 400 sofas and 300 cars, is this point efficient? Is this point feasible? Yes or no and why or why not? d. If this economy produces 600 sofas and 700 cars, is this point feasible? Yes or no and why or why not? e.Explanation / Answer
a) The opportunity cost of one sofa is 600/900 = 0.66. So to manufacture one sofa we have to give up 0.66 cars. TO produce 3 sofas the economy will have to give up (0.66 x 3) = 2 cars.
The opportunity cost of 3 sofas is 2 cars.
b) The opportunity cost of 2 cars is 3 sofas.
c) Yes, as the point B lies on the PPF it will be considered as efficient. (any point on the PPF itself is efficient, to be inefficient it has to lie below the PPF).
d) Yes, 400 sofas and 300 cars are feasible in the economy. And as this point will lie on the PPF it will be efficient too.
e) NO, 600 sofas and 700 cars will bit be feasible. as this point will lie outside the PPF in the economy. Any point outside the PPF is unachievable and inside is inefficient.