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Consider the following table which describes 5 points on a hypothetical production possibilities...

Question:

Consider the following table which describes 5 points on a hypothetical production possibilities curve:

Point: A B C D E
Capital Goods: 0 10 20 30 40
Consumption: 100 90 70 40 0

a) Use Microsoft Excel to graph the production possibility curve (or frontier), assuming that it consists of straight line-segments connecting points A, B, C, D, and E. As you setup your diagram, make sure that you put capital on the horizontal axis and consumption of the vertical axis.

b) Calculate the opportunity cost of additional capital in terms of fewer consumption goods at the points A, B, C, and D on the above production possibilities frontier.

Production Possibility Frontier:

Production possibility frontier (also called as production possibility curve) is a graphical presentation of various combinations of two goods that can be produced using given resources.

Answer and Explanation: 1

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a) The following diagram shows production possibility frontier -

Production Possibility Frontier

b) Opportunity Cost is the loss of next best...

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Applying the Production Possibilities Model

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Chapter 1 / Lesson 4
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Learn about the production possibilities curve. Examine the law of increasing opportunity cost and discover how to interpret a PPC graph with examples.


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