Question

In: Economics

Examine the production possibilities schedule below. Production Possibility Cupboards Tables A 0 14 B 1 12...

Examine the production possibilities schedule below.

Production Possibility

Cupboards

Tables

A

0

14

B

1

12

C

2

9

D

3

5

E

4

0

  1. Calculate the opportunity cost for each addition cupboard being produced.
  2. Use the production possibilities schedule to graph a production possibilities curve.
  3. Mark a point F on the graph that indicates unemployed resources for the Pinetree Furniture Company.
  4. Can the Pinetree Furniture Company produce 8 tables and 3 cupboards during the same year? Mark this production level as point G on the graph. Explain why this point is unattainable under present conditions. How might this production level be reached in the future?
  5. Show the effects on the curve of an increase in the labour force resulting from a more liberal immigration policy.
  6. Identify and explain the economic law which is responsible for the production possibility curve having a concave (bowed out) curvature.

Solutions

Expert Solution

a) Opportunity cost of producing one unit of cupboard can be defined as the amount of tables that has to be given to produce an additional unit of cupboard.

Cupboards Table Opportunity cost of producing one unit of cupboards
0 14 ......
1 12 2
2 9 3
3 5 4
4 0 5

b) A production possibility curve shows various combinations of two commodities that can be produced with the given resources during a given period of time.

Using the production possibility schedule, the production possibility curve can be drawn as follows.

In the diagram x axis represents cupboards and y axis represents tables. The different combinations of table and cupboards are represented by points A, B,C, Dand E  

c) A production possibility curve shows combonations of two commodities that can be produced with the given resources. All ponts on the PPC represents fuller utilization of resources. Any point below the PPC represents unemployment of resources.

Therefore point F(below the PPC) in the graph represents unemployed resources for the pinetree furniture company.

d) The pinetree company can't produce 8 tables and 3 cupboards during the same period. In the diagram, point G represents 8 tables and 3 cupbords. But the point is above the production possibility curve. This means that point G is unattainable with the given resources. To produce G, more resources are needed which is currently unavailable.

Production level G in the given period is attainable with the technological improvement and growth of new resources. In this situation, the production possibility curve will shift outward.

Rahul Sunny answered 1 year ago
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