Questions on PPFs
Look at the PPF and decide whether the statements that follow are true or false:
- R has the lowest level of unemployment.
- N is currently not achievable.
- A movement from M to L has an opportunity cost of C2 to C3.
- As more capital goods are produced the opportunity cost falls.
- A movement from R to S is impossible.
- T is likely to have the lowest standard of living in the short run.
- M is likely to have the highest standard of living in the long run.
Consider the information on Utopia, a hypothetical economy that can produce either rice or beans using all its scarce resources. The figures are in tonnes.
|RICE (m||BEANS (m)|
- Plot the PPF for Utopia, with rice on the Y-Axis, and beans on the x-axis.
- What is the opportunity cost of increasing production of rice from 30m tonnes to 40m?
- Comment on the situation experienced by Utopia if it produces 50m tonnes of rice and 50m of beans.