BU204_10 _Finley_Joey_ Unit 4

BU204_10 _Finley_Joey_ Unit 4 - Running head: THE BIG...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Joey D. Finley Kaplan University Macroeconomics BU204 FazlulH Miah March 29, 2011
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Questions: 1. Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish. Maximum annual output options Quantity of potatoes Quantity of fish (pounds) (pounds) A 1,000 0 B 800 300 C 600 500 D 400 600 E 200 650 F 0 675 a. Examine the Maximum annual output options table above and the resulting Production Possibility Frontier Graph below and answer parts b - f.
Background image of page 2
Production Possibility Frontier Graph b. Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes? (5 points ) Explain. (5 points ) No, it not possible according to current graph/resource capacity/limit. If the change in the amount of resources were to adjust, the 500 pounds of fish and 800 pounds of potatoes might be allowed. c. What is the opportunity cost of increasing the annual output of potatoes from 600 to 800 pounds? (5 points ) The opportunity cost would be 500 less 300, so that is 200 pounds of fish. d. What is the opportunity cost of increasing the annual output of potatoes from 200 to 400 pounds? (5 points ) The opportunity cost would be 650 less 600, so that is 50 pounds of fish. e. Can you explain why the answers to parts c and d are not the same? (20 points ) So it comes down to the use of experts in producing/acquiring resources. Let’s assume about 1/4 th of the total resource producers are expert in fishing and 1/4 th of the total resource producers and ½ of total resource producers are just good at doing both equally. Now if you want to either resource, let say potatoes, you’re going to first apply the experts and the potato production will commence. If you want to increase that amount, you will start to implement the use of the “just good” ½ and that will of course
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
increase the potato production but with a slightly less rate of production. Lastly, if you intend to increase the potato production even more, you would have to use the experts of fish production which would significantly reduce the production of fish and accordingly, a slightly less increase in potato production. f. What does this imply about the slope of the production possibility frontier? (20 points ) The production possibility frontier actually becomes steeper the farther down you go along the curve it to the right, thereby the production possibility frontier is somewhat bowed out or what would be considered concave.
Background image of page 4
2. Peter Pundit, an economics reporter, states that the European Union (EU) is increasing its
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/29/2011 for the course BUS 204 taught by Professor Smith during the Spring '11 term at University of Phoenix.

Page1 / 15

BU204_10 _Finley_Joey_ Unit 4 - Running head: THE BIG...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online