a. Draw the production possibilities boundary for
Choiceland on a scale diagram, with the production of
on the horizontal axis and the production of Y on the
vertical axis.
b. Compute the opportunity cost of producing an extra 15
units of X if the economy is initially producing 45 units of
X and 900 units of Y. How does this compare to the
opportunity cost if the economy were initially producing
60 units of X and 600 units of Y?
c. If Choiceland is producing 40 units of X and 600 units of
Y, what is the opportunity cost of producing an extra 20
units of X?
d. Suppose now that the technology associated with
producing good Y improves, so that the maximum level of
Y that can be produced from any given level of labour
input increases by 10 percent. Explain (or show in a
diagram) what happens to the production possibilities
curve.
20. For each of the following events, describe the likely effect on the
country’s production possibilities boundary (PPB). Start with a
PPB like the one shown and draw the likely change. In each case,
specify the appropriate labels for both axes in the diagram.
