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Production Possibility Curve Analysis

The document presents a tutorial with two questions related to production possibility curves (PPC) for a country and for an individual named Lucy. It includes tasks such as sketching the PPC, analyzing opportunity costs, and exploring the implications of production combinations. Additionally, it asks for assumptions of PPC and factors that can shift the PPC outward.

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Mr. Kamal
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6 views2 pages

Production Possibility Curve Analysis

The document presents a tutorial with two questions related to production possibility curves (PPC) for a country and for an individual named Lucy. It includes tasks such as sketching the PPC, analyzing opportunity costs, and exploring the implications of production combinations. Additionally, it asks for assumptions of PPC and factors that can shift the PPC outward.

Uploaded by

Mr. Kamal
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd

TUTORIAL 1

QUESTION 1

Imagine that a country can produce just two things: goods and services. Assume that over
a given time period it could produce any of the following combinations in the table
below.
Units of
0 10 20 30 40 50 60 70 80 90 100
goods
Units of
80 79 77 74 70 65 58 48 35 19 0
services

a) Sketch the country production possibility curve (PPC)

b) What does the shape of the PPC above indicate?

c) Assume that the country is currently producing 40 units of goods and 70 units of
services, what is the opportunity cost of producing 60 units of goods?

d) Based on PPC, is a combination of 50 units of goods and 70 units of services


attainable? Describe your answer

e) Illustrate in same diagram Q(a), show the effect on the PPC when a technological
breakthrough in the production of goods.

f) List four (4) assumptions of PPC

~kamal arifin Ibrahim~


QUESTION 2
The table below show Lucy’s production possibility table for dates and bananas

Combination Dates (kg) Bananas (kg)


A 54 0
B 50 2
C 42 4
D 32 6
E 20 8
F 0 10

a) Plot these possibilities on a graph paper and label the points:


i. J as unemployment
ii. K as scarcity
iii. L as specialization

b) If the Lucy production moves from point C to E, what is opportunity cost of


bananas?

c) What is the opportunity cost of bananas when Lucy production choose


combination D?

d) Based on the PPC, is a combination of 40 kg of dates and 2 kg of bananas


attainable? Give your reason

e) List th (2) factors that can shift the PPC bounds outward.

~kamal arifin Ibrahim~

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