Jun 11, 2024

Opportunity Cost and Production Possibilities in Country A

Question 1:

Calculate the opportunity cost of the following:

(i) Producing 5,000 kg of mangoes (ii) Increasing the production of apples from 1,000 kg to 2,000 kg

Discuss the type of opportunity cost portrayed by the PPC of Country A.

In a separate graph, illustrate the effects of the following on the PPC of Country A: A technological breakthrough in the production of apples A disease outbreak that reduces the production of mangoes Explain the Four assumptions of the PPC.

Question 2:

Use the following diagrams to answer questions (i), (ii), (iii), and (iv) below:

Which of the above diagrams illustrate(s) the effect of an increase in automobile worker wages on the market for automobiles? Discuss the effect on the equilibrium price and quantity following this event. Which of the above diagrams illustrate(s) the effect of a decline in the price of the personal computer on the market for software? Discuss the effect on the equilibrium price and quantity following this event. Which of the above diagrams illustrate(s) the effect of a decrease in incomes on the market for secondhand clothing? Discuss the effect on the equilibrium price and quantity following this event. Which of the above diagrams illustrate(s) the effect of a decline in the price of irrigation equipment upon the market for corn? Discuss the effect on the equilibrium price and quantity following this event.

The following data show the supply and demand schedules for a product in a competitive market.

Refer to the above data. If there is a change in market conditions so demand increases by 10 units at a given price while supply decreases by 10 units at any given price.

Determine the new equilibrium price and quantity following these changes in market condition Calculate the total consumer spending on this product based on your answer in part (i) above.

Question 3:

The table below shows Ah Chong’s marginal utility (MU) when he buys various quantities of watermelon (W), sour plum (S), and green tea (G).

a) Suppose that the unit price of watermelon, sour plum, and green tea are RM2, RM3, and RM1, respectively. Compute the marginal utility per ringgit (MU/P) for all goods at each unit b) Describe all potential combinations of the goods that Ah Chong can purchase c) Based on your answer in part (b), if Ah Chong has a budget of RM26, explain how many units of each product should Ah Chong purchase to maximize his utility. d) Based on your answer in part (c), compute the total utility (TU) derived by Ah Chong.

The table below shows the total production of a firm as the quantity of labor employed increases. The quantities of all other resources employed are constant.

Compute the marginal and average products and enter them in the table Explain at what levels of labor employed there are increasing returns and decreasing returns to labor Describe the relationship between the total product and marginal product Using a graph, explain the relationship between the laws of decreasing marginal returns and marginal cost curve.

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