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


Laboratory equipment sells for $75,000. The manufacturer offices financing at 8% with annual payments for the 4 years for the $50,000 of the cost. The
In a two input – one output production model, what are the profit-maximizing conditions, in a general equation form? What does each side of the
A plot of land costing $200,000 was acquired on January 1, 2001. The price level was 120 on that date. One-quarter of the land was sold on December 31
Consider the situation of the US debt and deficit? Explain the problem. Is the deficit and the debt a problem to be dealt with or not? Explain. Why do
Farmers whose crops were destroyed by the floods were much worseoff, but farmers whose crops were not destroyed benefited from thefloods, why?
The price level of a basket of goods in 2002 was $64.00. The price level of that same basket in 2003 was $68.00. If 2002 is the base year, what was th
Define the four Market Models that we discussed in this course. Give an example of each. In your opinion is onebetter than the other and why?
What groups in society would you expect to be the most enthusiastic about Adam Smith's ideas? Why? What groups might be expected to oppose them?
The energy Department estimates that domestic demand for natural gas will grow by more than 40 percent between now and 2025. Distinguish between a dem
Suppose that a country has a debt-to-GDP ratio of 64%. The growth rate of real GDP is 3%. Assume that seignior age is zero and the real interest rate