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Production Possibilities Curve: Graph and Detailed Analysis

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Using a graph and a table use two goods to construct a production possibilities curve. Clearly explain what a variety of different points on the curve mean. What would make the curve expand or contract? Why is efficiency lost at the extremes, as when substantially more of one good and very little of another is produced?

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See the attached file for the graph. The two goods are cars and steaks.

>Clearly explain what a variety of different points on the curve mean.

Any point on the curve is an efficient point: the country could not produce more of one good without sacrificing some production of the other.
Any point inside the curve is an inefficient point: the country could produce more of one or both goods without making any ...

Solution Summary

This solution uses Excel to draw a sample Production Possibilities Curve (PPC). It explains in detail what various points on the graph mean and explains why production efficiency is lost at the extremes of the curve.

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Analyzing learning curves, cost and production function, and incremental costs.

These problems deal with analyzing learning curves, cost and production function, and incremental costs.

See attached file for full problem description.

8.1 Cost and Production Functions. The total product curve shown here describes a production system in which X is the only variable input. Answer the following questions relating production to costs:

8.4 Incremental Cost. McFarlanci-Adler, Inc., produces innovative interior decorating software that it sells to design studios, home furnishing stores, and so on. The yearly volume of output is 15,000 units. Selling price and costs per unit are as follows:

8.9 Learning Curves. The St. Thomas Winery plans to open a new production facility in the Napa Valley of California. Based on information provided by the accounting department, the company estimates fixed costs of $250,000 per year and average variable costs of

AVC = $10 + $0.01Q

where AVC is average variable cost (in dollars) and Q is output measured in cases of output per year.
A. Estimate total cost and average total cost for the coming year at a projected volume of 4,000 cases.

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