A federal land holding in Alaska can produce both oil measured in barrels and recreational services measured in wilderness days.
Draw a PPF diagram with quantity of wilderness days measured on y-axis and quantity of oil barrels on x-axis. Identify the productivity eeficient points and discuss which point would satisfy SPC.
Suppose the total value of the two outputs is $1,200,000 and that the output mix satisfies SPC. The site manager has estimated the marginal rate of transformation between the two outputs at the current output mix is 10. From available data we also know that the price of an oil barrel is $70 and the quantity of oil produced is 10,000 barrels/year. Determine the number of annual wilderness days produced by the site.