Economics Assessment- Production Possibilities and Opportunity Cost

Subject: Economics    / General Economics
Question

Economics Assessment: Production Possibilities and Opportunity Cost

In the graph below, the production possibilities curve represents the maximum output of two products, wheat and tobacco, which can be produced by a small nation. Use the information presented in this graph to respond to the 6 inquiries below.

Students need to download this Word file and save it with the following file name format: Assessment-Last name-First name-Course and section number-Semester and year

(Example: Assessment-Smith-Jane-Econ 2301 83050-Spring 2017)

The completed assessment must be submitted to your instructor via email as a Word attachment. This assessment is worth 50 points and is due no later than February 27, 2017.

1. Explain what each individual point (A through H) on the graph represents. In your explanation, specify why each point is efficient, inefficient, or unattainable.

2. Fill in the opportunity costs in the following table:

When moving from points: A to B B to C C to D D to E F to B G to D

…the opportunity cost is:

3. Explain what is happening to opportunity costs when moving from point A to B to C to D to E.

4. Explain why the production possibilities curve is bowed outward, or concave.

5. From the information shown in the graph, can you determine which point represents the optimal production combination for this nation? Explain why or why not.

6. Over time, the production possibilities curve can shift. Explain what may cause the curve to shift outward (to the right) or inward (to the left). What would each of these shifts represent for the economy?