Question

In: Economics

An economy's production possibility boundary is given by the mathematical expression 110 = 2 A + B, where A...

An economy's production possibility boundary is given by the mathematical expression 110 = 2 A + B, where A is the quantity of good "a" and B is the quantity of good "b". [Hint: To help you answer this question, use the formula Y = mX + b and have good "a" quantities correspond to X-axis values and good "b" quantities correspond to Y-axis values.]

Part 1: If all the resources in the economy are allocated to producing good "a", what is the maximum level of production for this good

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Part 2: What is the maximum level of production for good "b"

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Part 3: What is the opportunity cost per unit of increasing the production of good “b”

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Part 4: Can the combination of 8 units of good A and 6 units of good B be produced in this economy (yes=1, no=2)

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Part 5: Can the combination of 30 units of good A and 16 units of good B be produced in this economy (yes=1, no=2)

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Expert Solution

Solution :

Answer to Part 1 : 55

When all resources are allocated for producing 'a' then maximum A is 55

Answer to Part 2 : 110

When all the resources are allocated to produce 'b' then maximum B is 110

Answer to Part 3 : -2

Opportunity Cost of producing one unit of 'b' is -2

Answer to Part 4 : (1) Yes

The bundle of 8 units of A and 6 units of B can be produced

Answer to Part 5 : (1) Yes

Th bundle of 30 units of A and 16 units of B can be produced

All the calculation and reasoning is provided in the following attached image files :

Rahul Sunny answered 2 years ago

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