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Q&A > Macro Topic 1.2 The Production Possibilities Curve.

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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. Annual license required. Do not use unless you have purchased a license No. This is because for every 2 bags of chips produced, there is a decrease in 10 bags of pretzels. Therefore, based on the data for 14 and 16 bags of chips, if we produce 15 bags of chips, we can only produce 10 bags of pretzels at the same time. Macro Topic 1.2 The Production Possibilities Curve Part 2 - Practice- Assume that the economy of Econland can produce robots (capital goods) and toy drones (consumer goods). Use the table below to answer the questions. 9. 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). 10. Calculate the opportunity cost if Econland switched from producing combination A to producing combination B. 11. Assume that robots are capital goods. On your graph, show the long-term effect of a technological improvement that increases the production of robots. Explain. 12. Assume the economy of Econland intentionally decides to produce combination D rather than combination B. What is the short term result and long-run trade-off of this decision? Explain. Part 3 - Making Connections- Compare the production possibilities of Macrostan and Econland to answer the following questions. 13. Which of the two economies represents the idea of constant opportunity cost? Explain. 14. Which of the two economies represents the idea of increasing opportunity cost? Explain. 15. Assume that your classmate suggested that both graphs represent constant opportunity costs because movement from combinations A to B, B to C, and C to D stays the same for each economy. Explain why this is incorrect. Video Help: https://youtu.be/4UbKAlMTL7c www.ACDCecon.com [Show More]

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