Chapter 02 - Recommended Problems - Solutions(1).pdf - CHAPTER 02 3 a b c 5 a b 10 a b 16 RECOMMENDED PROBLEMS SOLUTIONS If resources are left unused

Chapter 02 - Recommended Problems - Solutions(1).pdf -...

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C HAPTER 02 R ECOMMENDED P ROBLEMS S OLUTIONS MGEA01 M ICHAEL H O F ALL 2014 3. a. If resources are left unused, then this combination of production must lie inside the production possibilities frontier. So it is feasible, but it cannot be efficient. b. The transfer of resources has increased wheat production by 10 million bushels and reduced corn production by 17 million bushels. This is the opportunity cost given in the question, so production is moving to another point on the production possibilities frontier. Therefore, it is both feasible and efficient. c. The increase in the production of corn led to a decline in wheat production of 49.62 million bushels (999.62 950). If the opportunity cost is 0.666 bushels of wheat per bushel of corn, then we should get about 75.5 million more bushels of corn, which is the extra amount of corn produced. So the economy is again moving along its production possibilities frontier and the production point is feasible and efficient.
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