Economics > QUESTIONS & ANSWERS > Macro Topic 1.2 Opportunity Cost and The Production Possibilities Curve -Questions and Answers (All)

Macro Topic 1.2 Opportunity Cost and The Production Possibilities Curve -Questions and Answers

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Macro Topic 1.2 The Production Possibilities Curve Part 1 - Check Your Understanding- The economy of Macrostan can produce only two goods: chips and pretzels. At any given period of time, the peopl... e of Macrostan may choose to produce only chips, only pretzels, or a combination of the two according to the table below. 1. Can the economy of Macrostan produce 15 bags of chips at the same time that they produce 25 bags of pretzels? Why or why not? 2. Identify a specific combination of chips and pretzels that would represent an inefficient use of Macrostan’s resources. Explain. 3. Assume that Macrostan produces at combination A. Is that combination efficient or inefficient? Why or why not? 4. How would a technological change that increases the production of only pretzels affect the production of chips? Explain. 5. Use the numbers in the table to draw a production possibilities curve on the graph to the right. Be sure to label the axes and each combination (A-E). 6. Calculate the opportunity cost if Macrostan switched from producing combination A to producing B. 7. Calculate the opportunity cost if Macrostan switched from producing combination B to producing C. 8. Suppose that Macrostan is producing combination C. Show what will happen on the graph if there is a decrease in demand for chips [Show More]

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