Unit 2 Microeconomics Assignment St. Anagan

Unit 2microeconomicsunit 2 Assignment St Atanagioname

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. Given their limited resources and available technology, as they use more of their resources for corn production, fewer resources are available for breeding poultry. You are asked to draw a production possibility frontier (PPF) with corn on the horizontal axis and poultry on the vertical axis illustrating these options, showing points 1–7. Then, analyze the feasibility of specific production points, calculate opportunity costs for increasing outputs, and explain the slope of the PPF.

Paper For Above instruction

The concept of the Production Possibility Frontier (PPF) is fundamental in understanding the trade-offs faced by an economy or individual when allocating limited resources between different goods. In the case of St. Atanagio, a remote island dependent on the production of corn and poultry, the PPF illustrates the maximum feasible output combinations given the island's resources and technology. Drawing this frontier involves plotting the maximum possible combinations at points 1 through 7, which represent various production choices along the frontier.

The feasibility of producing 650 pounds of poultry and 650 pounds of corn simultaneously hinges on the location of this point relative to the PPF. If this point lies on the frontier, it indicates full utilization of resources and efficient production. If it lies inside the curve, it signifies underutilization or inefficiency; outside the curve, it suggests unattainability with current resources. Given the typical trade-offs, producing both commodities simultaneously at such high levels might be challenging, and likely, this point would lie outside the PPF, implying it is infeasible under current constraints.

When analyzing opportunity costs, an essential concept is understanding what must be foregone to gain additional units of a good. Increasing the output of corn from 800 to 1000 pounds involves reallocating resources that might otherwise produce poultry. The opportunity cost for this increase would be the amount of poultry forgone as resources shift from poultry production to corn. Generally, the opportunity cost increases as more of one good is produced, reflecting the law of increasing opportunity costs.

Similarly, increasing corn production from 200 to 400 pounds involves reallocating resources, and the opportunity cost again is the poultry that could have been produced instead. The opportunity costs differ between the two cases because the slope of the PPF is typically bowed outward due to increasing opportunity costs. When opportunity costs vary with different levels of production, the PPF is curved rather than straight, and the slope changes at different points along the frontier.

This variation in slope explains why the opportunity costs for increasing corn output differ depending on the initial and final quantities. Specifically, the opportunity cost increases as more resources are dedicated to corn, and fewer remain for poultry. This reflects the economic principle that resources are not perfectly adaptable between goods, leading to increasing opportunity costs as production shifts along the PPF.

In summary, constructing the PPF for St. Atanagio provides a visual representation of its production capabilities and limitations. The analysis of specific points highlights the concepts of feasibility and opportunity cost, critical to understanding economic trade-offs. The changing slope of the PPF encapsulates the principle of increasing opportunity costs, emphasizing the limitations inherent in resource allocation decisions. Recognizing these concepts is essential for making informed decisions in real-world economic contexts.

References

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