Question 1
Can St. Atanagio produce 650 pounds of poultry and 650 pounds of corn? Explain. Where would this point lie relative to the production possibility frontier?
This point will lie outside frontier of the production possibility. St. Atanagio can produce 650 pounds of corn and also 650 pounds of poultry of there is technological change, change in the labor force, and change in the natural resources and lastly change in the human capital (Lambert et al, 1991).
What is the opportunity cost of increasing the annual output of corn from 800 to 1000 pounds?
The opportunity cost of annual output increment of corn to 1000 pounds from 800 pounds is equivalent to to200 pounds of poultry. This implies that 200 pounds of poultry must be forgone so as to increase the corns’ annual output from 800 pounds to 1000 pounds. If St. Atanagio need to achieve this, it will be essential to cut the amount of produced poultry to 300 from 500.
What is the opportunity cost of increasing the annual output of corn from 200 to 400 pounds?
The opportunity cost of annual output increment of corn to 400 pounds from 200 pounds is equivalent to 75 pounds of poultry. This implies that 75 pounds of poultry must be forgone so as to increase the corns’ annual output from 200 pounds to 400 pounds (Lambert et al, 1991). This implies that if St. Atanagio needs an increment in this, it is needed to cut production of poultry by 75 pounds.
Can you explain why the answers to parts b. and c. above are not the same? What does this imply about the slope of the production possibility frontier?
The answers gotten from part (b) and (c) are not the same because corn production increases because St. Atanagio will apply more resources in the production. In part (b), 200 pounds of paultry was forgone to increase corn output by 200 pounds. The production possibility frontier slope here is unitary in nature as equal amount is needed for ne good to be foregone, to acquire the other good of the same quantity (David and James, 2006).
In part (c), 75 pounds of poultry was forgone to increase corn output by 200 pounds. In this scenario, less pounds of poultry was forgone to attain an equal amount that is 200 pounds of corn. Therefore, in this case production possibility frontier slope is narrow in nature. The PPF slope would get a concave shape that is a curve with a shape of an inner surface of sphere. This is because the amount of corn is increasing whereas the amount of poultry is decreasing (David and James, 2006).
Question 2
Below is the graph of the demand curve and the supply curve for Belgium cocoa beans. From the supply and demand schedules above, what are the equilibrium price and quantity of cocoa beans from Belgium?
The equilibrium price and the amount of cocoa beans from the above supply and demand schedules is $30 per 500 pounds from Belgium. As shown in the graph, this is the center of the laws of supply and demand that are opposing
What is the combined (total) demand schedule for Belgian cocoa beans that European and USA consumers buy?
The Belgian Cocoa beans combined (total) demand schedule that United States and European consumers buy corresponding to price per pounds is as follows
| Price ($) | Pounds |
| 40 | 300 |
| 35 | 700 |
| 30 | 1100 |
| 25 | 1500 |
| 20 | 1900 |
| Price of Belgium cocoa beans | U.S. Quantity of Belgium cocoa beans demanded | European Quantity of Belgium cocoa beans demanded | Total Demanded |
| (per pound) | (pounds) | (pounds) | (pounds) |
| $40 | 200 | 100 | 300 |
| $35 | 400 | 300 | 700 |
| $30 | 600 | 500 | 1100 |
| $25 | 800 | 700 | 1500 |
| $20 | 1000 | 900 |
From the supply schedule and the combined U.S. and European demand schedule, what will be the new price at which Belgium plantation owners can sell cocoa beans?
The new price in which Belgium cocoa beans can start selling is $35. This is an increment by $5.00 as a result of additional demand by United States.
What price will be paid by European consumers?
The consumers from Europe will see a price increase to $35 from 30 again because of the increase in demand of the United States.
What will be the quantity consumed by European consumers?
The amount of cocoa beans consumed by consumers from Europe will remain constant with a slight demand increase as a result of law of supply (Pindyck & Rubinfeld, 2005).
References
Lambert, C., Stuart, E. F., Governors State University., & RMI Media Productions. (1991). Production possibilities frontier. Olathe, Kan: Distributed by RMI Media Productions.
David A. Anderson and James Chasey. (2006). A Production Possibilities Frontier Experiment: Links and Smiles.
Pindyck, R. S., & Rubinfeld, D. L. (2005). Microeconomics. Upper Saddle River, N.J: Pearson Prentice Hall.
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