 Exercises
1a. The production possibilities frontier is
illustrated in Figure 3.2.
1b. Producing 500 bushels of corn and 500
pounds of beef is possible. This
production point lies inside the farm’s
production possibilities frontier so
there are unemployed resources.
1c. Producing 800 bushels of corn and
1,200 pounds of beef is not possible.
This production point lies outside the
farm’s production possibilities frontier.
1d. If the farm expands beef production
from 900 pounds to 1,200 pounds, corn
production decreases from 800 to 600
bushels. The opportunity cost of the additional 300 pounds of
beef is 200 bushels of corn, or 2/3 of a bushel of corn per pound
of beef.
1e.
If the farm produces 400 bushels of corn and 1,400 pounds of beef a year, it is
producing at a point of production efficiency because the point is on the PPF. There is
insufficient information given to determine if this production point is the point of
allocative efficiency