Question

1. Consider an economy called Choiceland that has 250 workers and produces only two goods, X and Y. Labour is the only factor of production, but some workers are better suited to producing X than Y (vice versa). The table below shows the maximum levels of output of each good possible from various levels of labour input. Number of Workers Producing X | Annual Production of X | Number of Workers Producing Y | Annual Production of Y 0 | 0 | 250 | 1300 50 | 20 | 200 | 1200 100 | 45 | 150 | 900 150 | 60 | 100 | 600 200 | 70 | 50 | 350 250 | 75 | 0 | 0 a) Draw the production possibilities boundary for choice on a scale diagram, with the production of X on the horizontal axis and the production of Y on the vertical axis. (2 marks) b) Compute the opportunity cost of producing an extra 15 units of X if the economy is initially producing 45 units of X and 900 units of Y. How does this compare to the opportunity cost if the economy were initially producing 60 units of X and 600 units of Y? (2 marks) c) If Choiceland is initially producing 40 units of X and 600 units of Y, what is the opportunity cost of producing an extra 20 units of X? (1.5 marks) d) Suppose now that the technology associated with producing good Y improves, so that the maximum level of Y that can be produced from any given level of labour input increases by 10 percent. Explain and show in a diagram what happens to the production possibilities curve. (2 marks)

          1. Consider an economy called Choiceland that has 250 workers and produces only two goods, X and Y. Labour is the only factor of production, but some workers are better suited to producing X than Y (vice versa). The table below shows the maximum levels of output of each good possible from various levels of labour input.

Number of Workers Producing X | Annual Production of X | Number of Workers Producing Y | Annual Production of Y
0 | 0 | 250 | 1300
50 | 20 | 200 | 1200
100 | 45 | 150 | 900
150 | 60 | 100 | 600
200 | 70 | 50 | 350
250 | 75 | 0 | 0

a) Draw the production possibilities boundary for choice on a scale diagram, with the production of X on the horizontal axis and the production of Y on the vertical axis. (2 marks)
b) Compute the opportunity cost of producing an extra 15 units of X if the economy is initially producing 45 units of X and 900 units of Y. How does this compare to the opportunity cost if the economy were initially producing 60 units of X and 600 units of Y? (2 marks)
c) If Choiceland is initially producing 40 units of X and 600 units of Y, what is the opportunity cost of producing an extra 20 units of X? (1.5 marks)
d) Suppose now that the technology associated with producing good Y improves, so that the maximum level of Y that can be produced from any given level of labour input increases by 10 percent. Explain and show in a diagram what happens to the production possibilities curve. (2 marks)

1. Consider an economy called Choiceland that has 250 workers and produces only two goods, X and Y. Labour is the only factor of production, but some workers are better suited to producing X than Y (vice versa). The table below shows the maximum levels of output of each good possible from various levels of labour input.

Number of Workers Producing X | Annual Production of X | Number of Workers Producing Y | Annual Production of Y
0 | 0 | 250 | 1300
50 | 20 | 200 | 1200
100 | 45 | 150 | 900
150 | 60 | 100 | 600
200 | 70 | 50 | 350
250 | 75 | 0 | 0

a) Draw the production possibilities boundary for choice on a scale diagram, with the production of X on the horizontal axis and the production of Y on the vertical axis. (2 marks)
b) Compute the opportunity cost of producing an extra 15 units of X if the economy is initially producing 45 units of X and 900 units of Y. How does this compare to the opportunity cost if the economy were initially producing 60 units of X and 600 units of Y? (2 marks)
c) If Choiceland is initially producing 40 units of X and 600 units of Y, what is the opportunity cost of producing an extra 20 units of X? (1.5 marks)
d) Suppose now that the technology associated with producing good Y improves, so that the maximum level of Y that can be produced from any given level of labour input increases by 10 percent. Explain and show in a diagram what happens to the production possibilities curve. (2 marks)

Added by Christopher B.

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