The following data show what combinations of corn and beef can be produced annually from a given piece of land.
a. On the graph below, draw the production possibility frontier for this piece of land. Corn Beef (bushel) (pounds) 12,000 0 10,000 500 8,000 1,000 6,000 1,250 4,000 1,450 2,000 1,500 0 1,500
b. Can this acreage produce the combination 4000 bushels of corn and 500 pounds of beef? What does this combination suggest about the use of this acreage? (Use your graph to answer this question.)
c. Can this acreage produce the combination 10000 bushels of corn and 1500 pounds of beef? What does this combination suggest about the use of this acreage?
d. What is the opportunity cost of expanding beef production from 1250 to 1450 pounds per annum, assuming the land is fully utilized? (Calculate the opportunity cost of one unit of extra beef in terms of corn.)
e. In general, what happens to the opportunity cost of producing beef as this economy expands its production of beef? Use the information in the table to illustrate your answer.
(HINT: You could calculate opportunity costs at each production bundle in the table and then compare all of them.) 0 2000 4000 6000 8000 10000 12000 0 500 1000 1500 2000 Beef
f. What would be the cost of producing 300 additional pounds of beef if this economy were currently producing 8000 bushels of corn and 500 pounds of beef.
g. What happens to the production possibilities frontier if a growth hormone is developed that will allow more beef production? Be sure to illustrate on the graph on the previous page.