Illustration of PPF .

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Chapter 2, Problem 1WNG

To determine

Illustration of PPF.

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Diagrams 1 and 2 below depict the production possibility frontier (PPF) for Rosie’s Bakery. Answer the questions below and show all calculations where appropriate. From Diagram 1, calculate the opportunity cost of increasing the production of cakes from 8 to 12 with the opportunity cost of increasing the production of cakes from 12 to 14. Show all calculations. In Diagram 2, how would explain the shift from PPF1 to PPF2 at Rosie’s Bakery using economic theory?

Use the PPF to answer the following questions: (a) At point F, how many sweaters are being produced? How many hard drives? (b) Label points A-H as either efficient, inefficient, or unattainable. (c) Can we determine if point F is productively efficient? If so, is it productively efficient? (d) Can we determine if point F is allocatively efficient? If so, is it allocatively efficient?

Assume you have a production possibilities frontier (PPF) bowed out from the origin with healthcare on the Y axis and education on the X axis. What does the PPF represent? How is opportunity cost demonstrated using the PPF?