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Automobiles vs Forklifts: Production Possibility Comparison

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I need some help with this assignment. Below is a production possibilities table for consumer goods (automobiles) and capital goods (forklifts).

Production Alternatives
Type of Production A B C D E
Automobiles 0 2 4 6 8
Forklifts 30 27 21 12 0

a. Show this data graphically. Upon what specific assumptions in this production possibilities curve based?
b. If the economy is at point C, what is the cost of one, more automobile? Of one more forklift? Which characteristic of the production possibilities curve reflects the law of increasing opportunity costs: its shape or its length?
c. If the economy characterized by this production possibilities table and curve were producing 3 automobiles and 20 forklifts, what could you conclude about its use of its use of its available resources?
d. Is production at a point outside the production possibilities curve currently possible? Could a future advance in technology allow production beyond the current production possibilities curve? Could international trade allow a country to consume beyond its current production possibilities curve.

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Solution Summary

Using automobiles vs forklifts in a production possibility comparison.

Solution provided by:
Robert Reinhart, MBA
Education
  • MBA, Merage School of Business, Univ of Cal, Irvine
  • BA, Univ of Cal, Irvine
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