23. Consider an economy producing two goods: cars and milk. The following table gives several points on this economy's production possibility frontier. Cars Milk (gallons/ year) 0 6000 100 4000 200 2000 300 0 a. Graph this economy's production possibility frontier. b. What is the opportunity cost of producing 1 gallon of milk? c. The synthetic production of Bovine Growth Hormone (BGH) allows dairy farmers to get twice as much milk from each cow. In terms of this production possibility frontier, this means that this economy can now produce twice as much milk at each level of car output. What is the opportunity cost of producing 1 gallon of milk?

-A) Describe production and the factors that go into producing various goods and services. -B) Describe the opportunity cost an economy incurs to increase the production of one product. Use a production possibilities frontier

4. Shifts in production possibilities Suppose the United Kingdom produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for barley, an agricultural good, and cars, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of an immigration law that results in fewer workers entering the country. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther. ? CARS (Thousands) 300 250 200 150 100 50 0 0 80 PPF 160 240 320 BARLEY (Millions of bushels) 400 480 6 PPF

2. Suppose that Happy Land produces only two goods-food and suntan oil. Its production possibilities are: Food (pounds per month) 300 200 100 0 Active Land also produces only food and suntan oil, and its production possibilities are: Food (pounds per month) 150 100 50 0 Draw the two PPFs Suntan oil (gallons per month) 0 50 100 150 Suntan oil (gallons per month) 0 100 2000 300 a. What are the opportunity costs of food and suntan oil in Happy Land? b. Why are the opportunity costs the same at each output level? c. What are the opportunity costs of food and suntan oil in Active Land? d. If each nation specialized where they have a comparative advantage; and then traded, find the acceptable ranges for trade. 1 pound of food would have to trade between which values of suntan oil? 1 pound of suntan oil would have to trade between which values of food? e. If each nation produces where they have a comparative advantage, and the terms of trade are 50 pounds of food for 75 gallons of suntan oil,…

Refer to the production possibility frontiers for two friends Frodo and Sam who can both produce Ice creams and Jelly beans. Frodo's maximum production of Ice creams is 500 with no Jelly beans, or 2,000 Jelly beans with no Ice creams. Sam's maximum production of Ice creams is 600 with no Jelly beans, or 1,200 Jelly beans with no Ice creams. ICE CREAMS ICE CREAMS 600 500 1200 JELLY BEANS 2000 JELLY BEANS Frodo' PPF Sam's PPF Answer briefly these TWO questions in the box space provided below. Part A: Assuming efficient production without trade, derive the maximum amount of Jelly beans that can be produced by Sam along with 300 Ice creams. Describe your steps in detail. Part B: Assume that Frodo and Sam agree to specialize in production and trade between themselves. Frodo offers 1,000 Jelly beans to Sam in exchange for 300 lce creams. Would Sam agree to this trade?

A production possibility frontier corn. The farmer can grow 80 bushels of soybeans or 160 bushels of corn on each acre of land. The price of soybeans is $13.20 per bushel. The price of corn is $5.85 per bushel. A farmer can grow soybeans or What is the opportunity cost (in dollars) per acre to grow soybeans? Corn? Which crop (pick only one) do you think the farmer will produce? Why?

!

1. If the economy is operating at point C in the PPF below, the opportunity cost of producing an additional 15 units of bacon is: Exhib: 6 50 40 30- A 20 10 D 20 20 40 50 60 (a) 40 eggs (b) 10 eggs (c) 20 eggs (d) 30 eggs (e) 50 eggs Explain: _ ||| 38 Egys