microbook_3e-page33 - 8. A nation with fixed quantities of...

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8. A nation with fixed quantities of resources is able to produce any of the following combinations of bread and ovens: loaves of bread (millions) ovens (thousands) 75 0 60 12 45 22 30 30 15 36 0 40 These figures assume that a certain number of previously produced ovens are available in the current period for baking bread. a. Using the data in the table, graph the ppf (with ovens on the vertical axis). b. Does the principle of "increasing opportunity cost" hold in this nation? Explain briefly. ( Hint: What happens to the opportunity cost of bread -- measured in number of ovens -- as bread production increases?) c. If this country chooses to produce both ovens and bread, what will happen to the ppf over time? Why? Now suppose that a new technology is discovered that allows twice as many loaves to be baked in each existing oven. d. Illustrate (on your original graph) the effect of this new technology on the production possibilities curve.
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This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.

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