Posted by Zann on Thursday, July 27, 2006 at 5:04am.
In an economy where a unit of labour can produce either 1 unit of x or 4 units of y (or any linear combination of the two) and a unit of capital can produce either 4 units of x or 1 unit of y (or any linear combination of the two). There are 100 units of each means of production. Suppose now that the discovery of new production technologies allows the production of both x and y by using only one of the two means of production (without a change in their respective productivity).
1) what will be the production possibility curve?
2) What will be the opportunity cost of producing 50 units of x?
How much y can the economy produce if it only makes y. The 100 units of labor can make 400 y and the 100 units of capital can make 100 y. A total of 500. Lable 500 on the yaxis of your this PPC. Start from here. If the economy gives up 1 unit of capital (1 y) it gets 4 units of x. So, your PPC gets a downward line with a slope of 1/4. After 100 units of capital, the opportunity cost changes, you the economy has to give up labor to get x; it gives up 4 units of y to get 1 x. So, your PPC gets a downward line with a slope of 4. In the end, your PPC crosses the x and y axis at 500 each.
Use the graph to answer #2.

Economics  Anonymous, Wednesday, October 20, 2010 at 9:35am
uybgvglguv
Answer This Question
Related Questions
 economic theory  assume that a business firm produces two commod ities, X and Y...
 Money and Banking  1. A firm uses capital to produce revenue. The marginal ...
 maths  A factory produces two products A and B using raw materials p and q. It ...
 Economics  In the short run a firm needs six units of labor to produce eight ...
 Accounting  Candace Corporation has decided to introduce a new product that can...
 calculus  Argus Company makes three? products: A,? B, and C. Each unit of A ...
 economics  3 . The production of housing has the following form: H = number of ...
 accounting  Anthony Company uses a perpetual inventory system. It entered into ...
 economics  suppose a firm's constantreturns to scale production function ...
 Linear programing  The Sebastopol Refinery processes two different kinds of ...
More Related Questions