St Atanagio is a remote island in the Atlantic. The inhabitants grow corn and br

Question

St Atanagio is a remote island in the Atlantic. The inhabitants grow corn and breed poultry. The accompanying table shows the maximum annual output combinations of corn and poultry that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for corn production, there are fewer resources available for breeding poultry. Maximum annual output options Quantity of Corn(pounds) Quantity of Poultry(pounds) 1 1200 0 2 1000 300 3 800 500 4 600 600 5 400 700 6 200 775 7 0 850 3. What is the opportunity cost of increasing the annual output of corn from 800 to 1000 pounds? 4. What is the opportunity cost of increasing the annual output of corn from 200 to 400 pounds? 5. Can you explain why the answers to parts 3. and 4. above are not the same? What does this imply about the slope of the production possibility frontier?

Explanation / Answer

opportunity cost of increasing corn from 800 to 100 is 200 pounds of poultry because poultry goes from 500 when corn is 800 to 300 when corn is 1000. so 500 -300 = 200 increasing corn from 200 to 400 is 75, they are not the same because corn and poultry are not an equal trade. does not take as much effort to a certain amount of corn, but increasing it over 700 is much more difficult, need to subsitute more poultry for corn the ppf is not flat. the slope is positive and the line is increasing

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