Unit 3 Assignment

# Unit 3 Assignment - 1 In ancient days a tribe of natives on...

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Page 1 of 20 1. In ancient days a tribe of natives on the mythical continent of Atlantis was able to produce two commodities to eat. They could harvest fish from the sea and they could grow a form of wild oats. Table 1.a. and Graph 1.a. both show the maximum annual output combinations of fish and wild oats that could be produced by the natives of Atlantis. Table 1.a. Maximum annual output options Kilograms of fish Bushels of wild oats 1 7,000 0 2 6,000 300 3 5,000 500 4 4,000 625 5 3,000 710 6 2,000 775 7 1,000 825 8 0 850

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Page 2 of 20 a. Could the Atlantis tribe have produced 8oo bushels of wild oats AND 5,000 kilograms of fish at the same time? EXPLAIN YOUR ANSWER. Where would this point lie relative to the production possibility frontier? b. Using Table 1.a., what would have been the marginal opportunity cost of increasing the annual output of wild oats by 200 bushels, from 300 bushels up to 500 bushels?
Page 3 of 20 c. Using Table 1.a., what would have been the marginal opportunity cost of increasing the annual output of wild oats by 200 bushels, from 625 bushels up to 825 bushels?

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Page 4 of 20 d. WHY are the marginal opportunity costs for two similar batches of 200 bushels of wild oats not the same? EXPLAIN. What does this difference imply about the shape of the Atlantis tribe’s production possibility frontier curve? The earlier batch of 200 bushels of wild oats (from 300 to 500) costs 1,000 kilograms of fish given up, while another identical but later batch of 200 bushels of wild oats (from 625 to 825) costs 3,000 kilograms of fish given up. That means that costs going from 1,000 to 3,000 kilograms of fish shows an increasing marginal opportunity cost . Increasing marginal opportunity costs cans also be understood as each new bushel of wild oats causes MORE kilograms of fish to be given up than the bushel of wild oats before it cost kilograms of fish. What does this imply about the slope of the production possibility frontier?