Economics (& Public Policy)
posted by KP .
I'm an idiot, but please let me know where to begin here. This is a distance learning course, and I CANNOT contact the professor, and cannot make sense of it in the textbook. If someone can please look at this and let me know where to begin, I thank you VERY much.
"The following data describe the production possibilities for a farm where only peaches and apples are produced:
Apples: 0, 5000, 10000, 15000, 18000.
Peaches: 50000, 48000, 38000, 18000, 0
a. Does this farm display constant costs, decreasing costs, or increasing costs in production of fruit? Why?
b. What would PPF for this farm look like? (Would it be linear, curved inward, or curved outward?)
c. If the farm were producing 15,000 apples and 20,000 peaches, would it be operating on, inside or outside of its production possiblity frontier?
n/m.. got it done; thanks -- though I sitll don't know what I'm doing.
Dont panic, don't give up in frustration; just think in through..
First, draw, the production possibilities curve. Make a simple graph, put Apples on the y-axis, Peaches on the x axis. Plot your 5 data points; then play dot-to-dot.
b) your curve should be bowed outward.
a) Production costs, in this example, are opportunity costs. Start at 0-apples 50000 peaches. How much does it cost the farmer to get 5000 apples. Answer: he must give up 2000 peaches. Now, how much does it cost to get another 5000 apples. -- Ans: 10,000 peaches. I would say costs in production are rising.
c) 15000 apples and 20000 peaches is clearly above the PPF (How the farm gets to this production point violates the underlying notion -- but that's a point for discussion at another time).