Question 6 1 pts A nation can produce two products: steel...

Question 6 1 pts A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. Production Possibilities Product ABCDEF Steel 0 1 2 3 4 5 Wheat 100 90 75 55 30 0 The marginal opportunity cost of the fifth unit of steel is 25 units of wheat. 30 units of wheat. 100 units of wheat. 6 units of wheat. < Previous Next ?

Transcript

00:01 We're given a table of production possibilities of product a to f for steel and wheat.

00:06 We're to find the total opportunity cost of the three units of steel, the marginal opportunity cost of the third unit of steel from c to d, and a change from combination c to b, and in moving stepwise from possibility a to b to c to f.

00:27 We're to find the cost of a unit of steel in terms of wheat and contrast how a market system and a command economy try to cope with economic staticity.

00:40 Firstly, to determine the total opportunity cost of the three units of steel, we need to compare the amount of wheat given up when producing each additional unit of steel.

00:50 So from a to b, the opportunity cost is 100 units minus 90, which is 10 units of wheat.

01:03 And from point b to c, the opportunity cost is 90 minus 75, which is 15 units.

01:12 From c to d, the opportunity cost is 75 minus 55, which is 20 units.

01:18 So the total opportunity cost for the three units of steel is 10 plus 15 plus 20, which is 45 units of wheat.

01:33 Now, for the second question, the marginal opportunity cost, this refers to the additional cost incurred when producing one more unit of a specific product.

01:48 So in this case, the marginal opportunity cost of a third unit of steel from c to d would be 20 units of wheat.

02:10 Now, this means that to produce one more unit of steel, 20 units of wheat must be given up.

02:17 Thirdly, a change from combination c to b means that there is a shift in production from two units of steel and 75 units of wheat to one unit of steel and 90 units of wheat.

02:39 So you can say there's a change or rather there's a shift in production from two units of steel and 75 units of wheat to one unit of steel and 90 units of wheat.

03:06 So this change indicates a decrease in the steel production clearly and an increase in the wheat production...

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