The production possibilities curve for 2020 and 2025.
Explanation of Solution
Figure -1 shows the production possibilities curve for 2020 and 2025
Figure -1
In the above graph, vertical axis measures the two – door convertible and the horizontal axis represents the four – door convertible. In 2020, the maximum production is 100,000 four door sedans or 100,000 two door convertibles. Thus, the apple must be given up producing one –two door convertible to gain one four door sedan.
In 2025, the maximum production is 150,000 two door convertibles or 100,000 four door sedans, thus to gain one four door sedans apple must be give up producing 1.5 two door convertibles.
Opportunity cost of producing one four door sedan in 2020 is 1 two –door convertible
Opportunity cost of producing one four door sedan in 2025 is calculated as follows.
Opportunity cost of producing one four door sedan in 2025 is 1.5 two –door convertible.
Concept introduction:
Opportunity cost: Opportunity cost refers to the value of forgone goods and services to get the other goods and services.
Production possibilities frontier: Production possibilities frontier:
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Chapter 2 Solutions
Economics Plus MyLab Economics with Pearson eText (2-semester Access) -- Access Card Package (6th Edition) (The Pearson Series in Economics)
- Briefly explain how an economy could shift production from an inefficient point of production (such as point E in the picture above) to an efficient point of production (such as point C).arrow_forwardThe figure to the right illustrates the trade-offs facing Ford Motor Company. The line in the graph is Ford's production possibilities frontier. If Ford uses all its resources to produce trucks, how many can it produce? 10.0 thousand trucks per day. (Enter a numeric response using a real number rounded to one decimal place.) Suppose Ford is currently building 3 thousand cars per day. To build an additional 1 thousand cars, how many fewer trucks can be built? thousand fewer trucks per day. According to the graph, building 11 thousand cars and 11 thousand trucks per day is Quantity of trucks (1,000s per day) 12- PPF 7 8 9 10 Quantity of cars (1,000s per day) 12 13 14 Q Qarrow_forwardSuppose the fictional country of Biscayne produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for sorghum, an agricultural good, and electric scooters, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a time-saving innovation in the manufacturing of electric scooters. 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. ELECTRIC SCOOTERS (Thousands) 180 150 120 90 30 0 30 60 90 PPF 120 SORGHUM (Millions of bushels) 150 180 бо PPF ?arrow_forward
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