Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 2, Problem 7WNG
To determine
Explain which points represent efficiency.
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( a) why is the slop of PPF downward?
(b) why does the PPF look concave to the origin?
(c) What is positive economic analysis?
Introduction to the Production Possibilities Curve (PPC)
As you know, the basic economic problem is scarcity. Since we do not have enough scarce resources to satisfy
everyone's needs and wants, we all have to make choices. We must choose how to spend our time, our energy, our
money, and our material possessions, and for every choice that is made, a cost is suffered.
The relationship between choice and cost can be shown in a graph called a production possibilities curve, or PPC. For
example, consider a student who has 4 hours of free time in the evening. He or she can choose to spend some, all, or
none of those 4 hours studying for a test the following day. He or she could also use the time to catch up on sleep.
These choices can be graphed:
Choice A - spend all 4 hours studying
Choice B- spend 2 hours studying, and 2 hours getting extra sleep
Choice C- spend all 4 hours sleeping
Of course, other combinations of the 4 hours exist.
The student could study for 3.5 hours, and get an extra…
Use the PPF to answer the following question:
1. Can we determine if Point F is allocatively efficient?
Chapter 2 Solutions
Macroeconomics
Ch. 2.1 - Prob. 1STCh. 2.1 - Prob. 2STCh. 2.1 - Prob. 3STCh. 2.1 - Prob. 4STCh. 2 - Prob. 1QPCh. 2 - Prob. 2QPCh. 2 - Prob. 3QPCh. 2 - Prob. 4QPCh. 2 - Prob. 5QPCh. 2 - Prob. 6QP
Ch. 2 - Prob. 7QPCh. 2 - Prob. 8QPCh. 2 - Prob. 9QPCh. 2 - Prob. 10QPCh. 2 - Prob. 11QPCh. 2 - Prob. 12QPCh. 2 - Prob. 13QPCh. 2 - Prob. 1WNGCh. 2 - Prob. 2WNGCh. 2 - Prob. 3WNGCh. 2 - Prob. 4WNGCh. 2 - Prob. 5WNGCh. 2 - Prob. 6WNGCh. 2 - Prob. 7WNGCh. 2 - Prob. 8WNGCh. 2 - Prob. 9WNGCh. 2 - Prob. 10WNGCh. 2 - Prob. 11WNGCh. 2 - Prob. 12WNG
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- Tom's lawn service specializes in mowing lawns and trimming bushes. Tom has 4 hours to devote to lawn services. In 1 hour, he can mow 3 lawns or trim 5 bushes. Tom's PPF is a straight line Tom's PPF intersects the graph's axis for mowing lawns at and intersects the graph's axis for trimming bushes at (Enter your responses as whole numbers.)arrow_forwardShifts in production possibilities Suppose South Africa produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for barley, an agricultural good, and locomotives, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a breakout of avian flu that sickens millions of workers. 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.arrow_forwardQ.20 What will be the shape of PPC when marginal opportunity cost is increasing? (a) Concave to the origin (c) Upward sloping (b) Convex to the origin (d) both (a) and (c) (b)arrow_forward
- Suppose Megan has a yearly budget of $240 to spend on juice and cereal. Juice is priced at $4 per gallon, and cereal is priced at $6 per box. If Megan spends her entire $240 on juice, she can buy 60 gallons of juice. If she spends her entire $240 on cereal, she can buy 40 boxes of cereal. Use the blue line (circle symbol) to plot Megan's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of juice and cereal that are affordable for Megan. Finally, place the black point (plus symbol) on the point on Megan's budget constraint that corresponds to a scenario in which Megan spends $120 on each good. Note: Dashed drop lines will automatically extend to both axes. 120 110 100 Вс, ($240) 90 80 Affordable Region 70 60 50 $120 on Each 40 30 20 BC, ($360) 10 + 10 20 30 40 50 60 70 80 90 100 110 120 JUICE (Gallons) CEREAL (Boxes)arrow_forwardKatie loves swimming. Every afternoon, she visits the local swimming pool for a swim. The entry cost to the pool costs Katie $10 but she can swim for as long as she wants. Once she has entered the pool and paid the fee, Katie wonders how many hours should she spend swimming if she were to think like an economist. She expects to gain an incremental benefit of $21 from the first hour of swimming, then gains subsequent incremental benefits of $17 from the second, $11 from the third and $4 from the fourth. For every hour spent swimming, it will cost Katie $6 as she could have spent the time doing her homework. In determining how many hours Katie should be swimming, the $10 entry fee to the pool is a/an Type A for Average cost, M for Marginal cost, S for Sunk cost or O for Opportunity cost. Using marginal analysis, what is the optimal amount of hours Katie should spend swimming? The maximum surplus for Katie, from spending the number of hours you found in part b, is $ Answer to the nearest…arrow_forwardWhat is meant by produce outside ppf and produce inside ppfarrow_forward
- sider all two goods Step 1: Draw a production possibilities frontier (PPF) for this economy. Label blueberries on the vertical axis and batteries on the horizontal axis. Label one point that is "efficient", one point that is "inefficient", and one point that is "unattainable".arrow_forwardSuppose the fictional country of Everglades produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for millet, an agricultural good, and telephoto lenses, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a long drought that reduces the amount of water available for farmers to use for irrigation. 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. TELEPHOTO LENSES (Thousands) 360 300 240 100 120 60 . 10 PPF 20 30 40 MILLET (Millions of bushels) 50 60 PPFarrow_forwardDrawing a production possibilities frontier (PPF) Instructions: Consider an economy than only produces two goods - Blueberries and Batteries. Step 1: Draw a production possibilities frontier (PPF) for this economy. Label blueberries on the vertical axis and batteries on the horizontal axis. Label one point that is "efficient", one point that is "inefficient", and one point that is "unattainable". Step 2. Draw another PPF of the economy with the axes labeled. Grab another color pen/pencil/highlighter and show how the PPF would change if there was a technological change that increased the production of batteries only. (Hint: The intercept for blueberries will not change.) Clearly label the new PPF. Step 3. Draw another PPF of the economy with the axes labeled. Grab another color pen/pencil/highlighter and show how the PPF would change if there was a drought that destroyed some of the blueberry harvest. (Hint: The intercept for batteries will not change.) Clearly label the new…arrow_forward
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