Estaban has two fields on his farm near Vallencia, Spain where he can grow oranges and olives. Field 1 is 100 acres in size. It can produce 400 bushels of oranges per acre or 300 bushels of olives. Field 2 is 200 acres in size and can produce 600 bushels of oranges per acre or 800 bushels of olives per acre.
a) Draw a separate production possibilities frontiers for each of these fields.
b) Calculate the opportunity cost of oranges in Field 1 and the opportunity cost of oranges in Field 2.
c) Draw an overall PPF for Estaban's farm.
d) Suppose Estaban wishes to produce 20,000 bushels of oranges. How many acres should he devote to oranges? What is the maximum number of bushels of olives he could produce if he produces this quantity of oranges? What is the OC of another bushel of oranges at this level of orange production?
e) Suppose Estaban now wishes to produce 120,000 bushels of oranges. How many acres should he devote to oranges? What is the maximum number of bushels of olives he could produce if he produces this quantity of oranges? What is the OC of another bushel of oranges at this level of orange production?