Find your question
and Get expert's answers*
Homework Help
*Click here to submit
Refer a Friend
Discount up to 15%*
Prepared References
Save up to 50%*
Homework Help >> Macroeconomics
  Principle of increasing opportunity cost  

Topic for Assignment: Production Possibility frontier

Q1. Suppose that a country can manufacture just two things: goods and services. Suppose that over a given period it could produce any of the subsequent combinations:

Units of goods    0    10    20    30    40    50    60    70    80    90    100
Units of service 80    79    77    74    70    65    58    48    35    19      0

(a) Draw country’s production possibility curve.

(b) Supposing that the country is currently manufacturing 40 units of goods and 70 units of services, what is the opportunity cost of manufacturing another 10 units of goods?

(c) Elucidate how the figures exemplify the principle of increasing opportunity cost.

(d) Now suppose that technical progress leads to a 10 per cent raise in the output of goods for any given amount of resources. Draw new production possibility curve.

How has the opportunity cost of producing extra units of services altered?

(a) See the continuous line in Diagram below.

(b) 5 units of services producing another 10 units of goods mean producing a total of 50 units of goods. Therefore, referring to the table,production of services has to be declined from 70 units to 65 units: a sacrifice of 5 units of services.

(c) Each additional 10 units of goods produced involves a raising sacrifice of services.  Thus increasing production of goods from 0 to 10, to 20, to 30, to 40, etc. involves a sacrifice of 1 (80–79), then 2 (70–77), then 3 (77–74), then 4 (74–70), etc. units of services.

Likewise, raising the production of services involves an increasing sacrifice of goods.  This can be seen by starting at the right-hand end of the table and moving to the left.  Smaller and smaller raises in services are obtained for each extra 10 units of goods sacrifice: in other words, for each extra unit of services obtained, more and more goods must be sacrificed.

(d) See the dashed line in Diagram below.  The opportunity cost of producing extra services has risen (by 10 per cent): in other words, each extra unit of services produced involves a sacrifice of 10 per cent more goods than previously.

1476_ppc curve.jpg

Ask an Expert for Solution

Ask an Expert for Answer Principle of increasing opportunity cost

Request for Solution Files

Expected delivery within 24 Hours

Course: Macroeconomics

Ref. No:- TGS01567




Like US:-
Assignment Help

Ask an Expert & Get Answer

  • Quality work delivery
  • 100% Plagiarism free
  • Time on delivery
  • Privacy of work
Order Now
More Macroeconomics Questions


You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less t
If we are trying to maximize economic efficiency, which one of the following statements is true? Imply the extraction of all of a resource now as long
  Assume you plan to purchase a Ford Mustang and require a car finance of $12,000. You take the loan from the K-State Credit Union at 3.5% int
Calculate the rationing function of prices? Should health care be subject to this type of rationing? Be sure to comment on at least two other posts.
Apple Computer sold shares in an initial public offering (IPO) for $22 per share on December 12 of 1980. Since then, the stock has split 2-for-1 thr
Explain what savings rate is necessary for the economy to reach this consumption maximizing steady state and how does this compare to the current sa
The entry barrier could benefit a single firm or it could benefit a small group of firms. Give them some documentation of the a citation, entry barr
  Within the past five years a certain country ended its almost two-year peg of its own currency to the US dollar. Explain what country was th
An investment pays $2,100 per year for first three years, $4,200 per year for the next 8 years, and $6,300 per year the following 12 years.
Why would Kenyan government take 10% tax off the employee's paycheck because it is given the importance of the M-Pesa to the rising economic growth