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Example of Production Possibilities Fronteer

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Suppose a Production Possibilities frontier includes the following combinations:
Cars / Washing Machines
0 1,000
100 600
200 0

a. Graph the PPF, assuming that is has no curved segments
b. What is the cost of producing an additional car when 50 cars are being produced?
c. What is the cost of producing an additional car when 150 cars are begin produced?
d. What is the cost of producing an additional washing machine when 50 cars are being produced? when 150 cars are being produced?
e. What do your answers tell you about opportunity cost?

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Solution Summary

Answers the following question

Suppose a Production Possibilities frontier includes the following combinations:
Cars / Washing Machines
0 1,000
100 600
200 0

a. Graph the PPF, assuming that is has no curved segments
b. What is the cost of producing an additional car when 50 cars are being produced?
c. What is the cost of producing an additional car when 150 cars are begin produced?
d. What is the cost of producing an additional washing machine when 50 cars are being produced? when 150 cars are being produced?
e. What do your answers tell you about opportunity cost?

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Macroeconomics: Production Possibilities Frontier

1. Draw and explain a production possibilities frontier for an economy that produces milk and cookies. What happens to this frontier if disease kills half of the economy's cow population?

2. Use a production possibilities frontier to describe the idea of "efficiency."

3. What is the difference between a positive and a normative statement? Give an example of each.

4. Why do economists sometimes offer conflicting advice to policymakers?

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