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Suppose that a society could produce the following maximum combonations of food and diamonds in a given year
Suppose that a society could produce the following maximum combonations of food and diamonds in a given year.
| Point | Food | Diamonds |
| A | 100 | 0 |
| B | 80 | 30 |
| C | 60 | 50 |
| D | 40 | 60 |
| E | 20 | 65 |
| F | 0 | 68 |
a) Draw a production possibilities frontier (PPF) with food on the horizontal axis and dimonds on the vertical axis. 6 marks
b) Is it possible and/efficient for this society to produce 50diamomds and 80 food?Why? 1 mark
c) If society is currently producing at alternative C, then the opportunity cost of increasing the output of food from 60 to 80 is ...........diamonds. 1 mark
d) If society is currently producing at point E, then the opportunity cost of increasing the output of food from 20 to 40 is .............diamonds. 1 mark
Expert Solution
a)
| Point | Food | Diamonds |
| A | 100 | 0 |
| B | 80 | 30 |
| C | 60 | 50 |
| D | 40 | 60 |
| E | 20 | 65 |
| F | 0 | 68 |
b) Producing 50 diamond and 60 food is feasible while producing 80 food is not possible for an economy to produce.
c) If society is currently operating at point C, opportunity cost of raising food from 60 to 80 is 20 diamond because diamond reduced from 50 to 30.
d) If society is current producing at point E, opportunity cost of raising food from 20 to 40 is 5 diamond because diamond reduced from 65 to 60.
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