Homework 2: The PPF
Write out your answers to the six questions below. Once you are confident in your answers, go to
the HOMEWORK 2 link in Module 2 and answer the multiple choice questions. After you
submit the quiz, you will be able to immediately review your results. If you have any questions
incorrect, you have two more attempts to retake the homework quiz and correct your answers.
Don't forget to keep track of any right and wrong answers as you go along.
The figure below shows the production possibilities frontier for a country that produces two
goods, wheat and trucks. Use this Figure to answer the following question(s).
Wheat
(tons)
A
B
250
C
220
180
D
100
E
F
100 200 300 400
Trucks
1. If the economy is currently at point D. What is the opportunity cost of producing an additional
100 trucks?
2. Suppose the economy is producing 180 tons of wheat and 200 trucks. Does this imply the
economy is operating efficiently, the economy is not producing as much as it could, the demand
for trucks is low, or that economic growth would help the economy move to its production
possibilities frontier?
3. What does the bowed out shape of the production possibilities frontier demonstrate?
4. What could explain the rationale for choosing to produce at point C over point D?
5. What is the effect on the PPF or the economy's position on the PPF of a recession which
increases unemployment nationwide?
6. What is the effect on the PPF or the economy's position on the PPF if a new machine to
harvest wheat more efficiently were invented?
