With a fixed amount of resources, 20 units of computers or 30 units of food can be produced. Also, the combinations of computer and food can be produced. Combinations are 25 units of food and 4 units of computers, 20 units of food and 7 units of computers, 15 units of food and 10 units of computers, etc. Draw the PPF. If new technology in computer production is invented and adopted, what will happen to the PPF? Find the opportunity cost of first 4 units of computer? If the total resources of the country increase, what will happen to the PPF
To draw the Production Possibility Frontier (PPF) for this scenario, we need to plot the different combinations of computers and food that can be produced with the given resources.
Let's assume that the horizontal axis represents the quantity of computers and the vertical axis represents the quantity of food.
Based on the information provided, we know that with a fixed amount of resources, either 20 units of computers or 30 units of food can be produced separately. This gives us two points on the PPF: (20, 0) and (0, 30).
Additionally, there are combinations of computers and food that can be produced simultaneously. Some of these combinations are provided: (25, 4), (20, 7), (15, 10), etc. We can plot these points on the graph as well.
Once we plot these points, we can connect them to form the PPF. The PPF represents the maximum possible combinations of computers and food that can be produced with the given resources and technology.
Now, if new technology is invented and adopted in computer production, it would increase the efficiency or productivity of producing computers. As a result, the number of computers that can be produced with the same amount of resources would increase. This means the PPF will shift outward, allowing for greater potential combinations of computers and food.
To find the opportunity cost of the first 4 units of computer production, we look at the trade-off between computers and food. We can calculate this by considering the slope of the PPF at that point. If we assume the PPF is linear, then the opportunity cost would be the change in food divided by the change in computers.
For example, if producing the first 4 units of computers requires a decrease of 5 units of food, then the opportunity cost would be 5/4, or 1.25 units of food per computer.
If the total resources of the country increase, it would mean there are more resources available for production. This increase in resources would allow for a greater quantity of both computers and food to be produced. Consequently, the entire PPF would shift outward, indicating an expansion of the production possibilities. This means more combinations of computers and food can be produced compared to the previous PPF.