Scribd
Upload
165 views9 pages

Chapter 1 Tutorial 2

The production possibilities frontier (PPF) of a cotton factory producing pillows and blankets is plotted based on given data points. If the factory produces 100 pillows and 400 blankets, the opportunity cost of 100 more pillows is 40 blankets. If the factory produces 300 pillows and 300 blankets, the opportunity cost of 100 more blankets is 200 pillows. If the factory currently produces 200 of each, it can produce 400 pillows or 360 blankets without reducing the other good.

Uploaded by

mariam raafat
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
165 views9 pages

Chapter 1 Tutorial 2

The production possibilities frontier (PPF) of a cotton factory producing pillows and blankets is plotted based on given data points. If the factory produces 100 pillows and 400 blankets, the opportunity cost of 100 more pillows is 40 blankets. If the factory produces 300 pillows and 300 blankets, the opportunity cost of 100 more blankets is 200 pillows. If the factory currently produces 200 of each, it can produce 400 pillows or 360 blankets without reducing the other good.

Uploaded by

mariam raafat
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 9

PART

1 Tutorial two
• Question 7:
• Explain how the production possibilities frontier (PPF) explains the
economic problem? And then illustrate how the production
possibilities frontier can determine degree of specialization of
available resources. Use suitable graphs to illustrate your answer.

• First: what is the economic Problem ?


• The economic problem (dilemma) is shown by the notion of
economics which is Resources are less than needs or the needs are
bigger than available resources.

• Resources (economic problem) ˂ Needs Scarcity


Sacrificing
• Choice decision Opportunity Cost
“Priorities”
• The Production Possibilities Frontier (PPF)
shows all combinations of two goods that
an economy can possibly produce, given
its resources and technology.

▪ The PPF illustrates the concepts of tradeoff


and opportunity cost, efficiency and
inefficiency, unemployment, and economic
growth.
▪ A bow-shaped PPF illustrates the concept of
increasing opportunity cost.
Summary:
• Any point on the PPF curve is an efficient point, as it presents:
• Fully employed resources.
• Absence of waste (all available resources have been used efficiently).
• Any point outside the PPF curve is unattainable point, as: The economy is
not able to reach this point with its present level of technology and
resources.

• Any point below or inside the PPF curve is inefficient point, as: It
represents unemployed resources or existence of waste. (Availability to
produce more).

• If the available resources are specialized in producing certain product,


PPF curve take a bow shape. (Labor has a degree of specialization in
producing one product to another)
• If available resources are not specialized in the production of a specific
product, PPF curve takes a straight line. (Pastry and bread production).
• Question 8:
• The following table provides information about the production
possibilities frontier of a cotton factory:
Pillows Blankets
0 420
100 400
200 360
300 300
400 200
500 0

a. Plot and connect these points to create the production possibilities


frontier of the cotton factory.
b. If the factory is producing 100 pillows and 400 blankets, what is the
opportunity cost of an additional 100 pillows ?
c. If the factory is currently producing 300 pillows and 300 blankets,
what is the opportunity cost of an additional 100 blankets ?
d. Suppose the factory is currently producing 200 pillows and 200
blankets. How many additional pillows could be produced without
giving up any blankets? How many additional blankets could be
produced without giving up any pillows?
Answer
a. Plot and connect these points to create the production possibilities
frontier of the cotton factory.

Blankets 500

A
400
B d. 360 blankets without giving up any
C pillows (200)
c. The
opportunity D
cost of an 300 c
additional 100
blankets is
200 pillows.
E d. 400 pillows without giving up any
200
blankets (200)
d

100

b F
0
100 200 300 400 500 Pillows
b. The opportunity cost of an additional 100 pillows is 40
blankets.
X Y

Points Change in Pillows Pillows Blankets Change in Blankets


A - 0 420 -
B 100 100 400 20
C 100 200 360 40
D 100 300 300 60
E 100 400 200 100
F 100 500 0 200

b. If the factory is producing 100 pillows and 400 blankets, what is the
opportunity cost of an additional 100 pillows?

Answer:
By adding an additional 100 pillows, the opportunity cost will be 40
blankets.

c. If the factory is currently producing 300 pillows and 300 blankets, what is
the opportunity cost of an additional 100 blankets?

Answer:
By adding an additional 100 blankets, the opportunity cost will be 200
pillows.
d. Suppose the factory is currently producing 200 pillows and 200 blankets.
How many additional pillows could be produced without giving up any
blankets? How many additional blankets could be produced without
giving up any pillows?

Answer:

pillows that could be produced without giving up any blankets is 400 or 200
additional pillow
blankets that could be produced without giving up an pillows is 360 or 160
additional blankets

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy