1. A production possibilities table for two products, corn and paper, is found below. Usual assumptions regarding production possibilities are implied. Corn is measured in tons, and paper is measured per unit. Combination Corn Paper A 0 6 B 18 5 C 33 4 D 45 3 E 54 2 F 60 1 G 63 0
(a) Construct a production possibilities curve from this information placing corn on the vertical axis and paper on the horizontal axis.
(b) What is the marginal opportunity cost of producing the first unit of paper? The marginal opportunity cost of producing the fourth unit of paper?
(c) On your diagram, indicate a point of productive inefficiency with the letter U, a point of full employment with letter F and a point G indicating unattainable combination of corn and paper.
(d) Draw a new curve B that illustrates the results of improved technology in the production of corn, but no change in the production efficiency of paper.
(e) What economic lessons can we learn from Production possibility frontier?