2019FA ECO201R Unit 2 In-Class Exercise - FINAL.docx - Unit...

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Unit 2—Production Possibilities and Comparative AdvantageA farmer has 100 acres of land and has to choose between planting coffee trees and tea bushes. Some of the land is better for producing tea, some for coffee. The table shows the possible combinations (in tons) of coffee and tea that can be produced.1)Plot the farmer’s PPF in the space above with tea on the horizontal axis. 2)Calculate the opportunity cost of producing the 3rdton of tea. 3)Calculate the opportunity cost of producing the 6th ton of tea.4)Calculate the opportunity cost of producing the 10th ton of tea.5)What is happening to the opportunity cost of producing additional tons of tea? Why?6)Is it possible to produce 4 tons of coffee and 6 tons of tea? Why or why not?7)Assume the farmer is currently producing 4 tons of coffee and 5 tons of tea. How much does it cost the farmer to double his tea production? 8)Suppose a new technology is developed that increases tea production by 50%. Fill out the table and update the PPF.9)

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