https To see favorites here select then and drag to the

? ? ? |?https:/ To see favorites here, select then , and drag to the Favorites Bar folder. Or import from another browser. Import favorites O Tre QUESTION 6 3 21 a M the economy is at point C, what is the cost of one more automobile? Of one more forkid? Explain how the production possiblities curve reflects the law of increasing opportunity costs Forkifts b If the economy characterized by this production possibilities table and curve were producing 3 automobiles and 20 forklifts, what could you conclude about its use of its available resources? TT?Anal Ctiok Save and Subarit to save and submit. Click Save All Anscers to sque all ansuers. O Type here to search

Solution

Q6)

Point a) Cost of 1 more A = Production of F at C point / Production of A at C point

                                           = 21 / 4

                                           = 5.25 (Answer)

Cost of 1 more F = Production of A at C point / Production of F at C point

                                           = 4 / 21

                                           = 0.19 (Answer)

Movement along the production possibility curve, like D to C or C to B etc, increases opportunity cost. It is so because increasing the production of F at the cost of decreasing the production of A increases the opportunity cost.

Point b) In case of production of A, there is a gap of 2 units in between two consecutive alternatives; in case of production of F, there is a gap of 3^power. Now if there are 3 of A, then F would be in between 27 and 21 but can never be 20; this is the under-production of F, which is not efficient level of production. Therefore, available resources are not properly used.

Point c) The point outside the PPC indicates a failure to reach because of resource limitation.

Such level could be attained in the long-run if there is technological improvement.