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2 years ago
The following figure illustrates the production possibilities curve of a farmer who has to decide which quantities to produce of wheat and rice. Three possible production combinations—A, B, and C—are also marked on the figure.

 

a)   Which of the three combinations of wheat and rice, marked on the graph, is both efficient and attainable? Explain your answer.
b)   Calculate the opportunity cost of producing both wheat and rice.
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Microeconomics


Edition: 1st
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2 years ago
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a)   Point A on the graph represents a combination that is attainable but not efficient. This is because, given the available resources, the farmer can produce more of either wheat, or rice, or both at point A. Point C is unattainable as it lies outside the farmer's production possibilities curve. This implies that the farmer does not have enough resources to produce the combination represented by point C. Point B is both attainable and efficient as it lies on the farmer's production possibilities curve, which implies that the farmer is using all of his resources efficiently to produce the 400 pounds of wheat and 600 pounds of rice.


b)   The opportunity cost of producing 1 pound of rice = 10/10 = 1 pound of wheat.
The opportunity cost of producing 1 pound of wheat = 10/10 = 1 pound of rice.
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wrote...
2 years ago
Excellent answer, thx
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