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Chapter 2: Q 9 (page 46)

Construct a production possibilities curve for a nation facing increasing opportunity costs for producing food and video games. Show how the PPC

changes have given the following events.

(a) A new and better fertilizer is invented.

(b) Immigration occurs, and immigrants’ labor can be employed in both the agricultural sector and the video game sector.

(c) A new programming language is invented that is less costly to code and is more memory-efficient, enabling the use of smaller game cartridges.

(d) A heat wave and drought result in a 10 percent decrease in usable farmland.

Short Answer

Expert verified

The production possibility curve for video games and food production is,

(a) The production of food will increase, and the PPC rotates along the x-axis.

(b) The production of both video games and food will increase shifting the PPF rightwards.

(c) The production of video games will increase, and the PPC rotates along the y-axis.

(d) The PPC curve shifts inward as famine will lead to less production of food.

Step by step solution

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01

Step 1. Production Possibility Curve.

The Production Possibility Curve (PPC) shows the combinations of outputs that can be produced in an economy.

02

Step 2. The diagram.

The production possibility curve for facing increasing opportunity costs for producing video games and food is,

03

Part (a). New and Better Fertiliser

The PPC curve will rotate along the x-axis and the production of food increases but the production of video games will not change.

04

Part(b). Immigration

The production of both video games and food will increase since the immigrant laborers can be employed in both sectors shifting the PPF rightwards.

05

Part (c). A new programming language.

The PPC curve will rotate along the y-axis and the production of video games increases but the production of food will not change as the new technology will improve the production.

06

Part (d). A heatwave and drought resulted in famine.

The PPC curve shifts inward as famine will lead to less production of food and the production of video games will not change.

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Most popular questions from this chapter

Evaluate why everyone, whether poor or affluent, faces the problem of scarcity.

Suppose that in Fig 2-2, the nation currently is producing combination D in the table and on the graph of the production possibilities curve. What is the opportunity cost of producing 5 million more smartphones and moving to production combination C?

Senator Borman interjects the following comment after the statements by Senators Creighton and Long reported in Problems 2-10 and 2-11: “In fact, both of my esteemed colleagues are wrong, because an unacceptably large portion of our nation’s resources is currently unemployed.” Of the labeled points on the diagram, which one is consistent with Senator Borman’s position?

Suppose that in Fig 2-2, the nation currently is producing combination D in the table and on the graph of the production possibilities curve. What is the opportunity cost of producing 20 million more tablet devices and moving to production combination F?

A nation’s residents can allocate their scarce resources either to producing consumer goods or to producing human capital—that is, providing themselves with training and education. The following table displays the production possibilities for this nation:

Production CombinationUnits of Consumer GoodsUnits of Human Capital
A0100
B1097
C2090
D3075
E4055
F5030
G600

(a) Suppose that the nation’s residents currently produce combination A. What is the opportunity cost of increasing the production of consumption goods by 10 units? By 60 units?

(b) Does the law of increasing additional costs hold true for this nation? Why or why not?
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