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


Principle of increasing opportunity cost

Request for solution file

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

In an article about the financial problems of USA Today, Newsweek reported that the pa-per was losing about $ 20 million a year. A Wall Street analy
Constant annual operationg and maintenance costs of the circuits are 8 percent of the first cost . The average life of a circuit is 20 years. The re
determine the principle of equitythe principle of equity is that a tax must be fair and the tax is levied on those with the ability to pay taxthe
Describe a market for a good or service that is an oligopoly. How does the structure of this market affect the firms' decision-making?
define the points of individual choices makes and interacta how individuals make choicesbull scarcitybull opportunity costbull trade-offsbull
consider the above table assuming the government imposes a price floor on garbanzo beans of 8 what would be the likely resulta no change equilibrium
Define cost-push and demand-pull inflation. Discuss cost-push and demand-pull factors in Russian inflation in the 1990s. Discuss the statement: "Russi
Market analysts often use cross-price elasticities to determine a measure of the “competitiveness” of a particular good in a market. How
as previously stated the aim of the paper is to observe and analyse the effects of oil price shocks on key macroeconomic indicators in the uk economy
bullselect facultyapproved publicly traded firm prefer from middle east or international unique company which allows access to it financial