Unit 2 Assignment: St Atanagio
Course Number: -
Section Number: -
Unit Number: - 2
St Atanagio is a remote island in the Atlantic. The inhabitants grow corn and breed poultry. The accompanying table shows the maximum annual output combinations of corn and poultry that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for corn production, there are fewer resources available for breeding poultry.
Maximum annual output options | Quantity of Corn(pounds) | Quantity of Poultry(pounds) |
1 | 1200 | 0 |
2 | 1000 | 300 |
3 | 800 | 500 |
4 | 600 | 600 |
5 | 400 | 700 |
6 | 200 | 775 |
7 | 0 | 850 ...view middle of the document...
4. What is the opportunity cost of increasing the annual output of corn from 200 to 400 pounds?
Answer: We have to forgo 75 pounds of poultry to increase the annual output of corn from 200 to 400 pounds.
So the opportunity cost of increasing the annual output of corn from 200 to 400 pounds is equal to the 75 pounds of poultry.
5. Can you explain why the answers to parts 3 and 4 above are not the same? What does this imply about the slope of the production possibility frontier?
Answer: In point 3 we have to forgo 200 pounds of poultry to increase output of corn by 200 pounds; here the unitary slope in nature as the same quantity is needed to forgo one good, to acquire the same quantity of other good.
In point 4 we have to forgo 75 pounds of poultry to increase output of corn by 200 pounds, in this case they forgo less to attain the same quantity i.e., 200 pounds of corn, so here the narrow slope in nature. The slope of PPF would get a concave shape, a curve like the inner surface of sphere because, the quantity of corn is increasing while the quantity of poultry decreasing.
* Beggs, Jodi. "The Production Possibilities Frontier." About.com Economics. N.p., n.d. Web. 11 Apr. 2014....