# AB 224 Unit 2 Assignment St Atanagio

Unit 2 Assignment: St Atanagio

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Unit Number:– 2

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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. Obviously, given their limited resources and available technology, as they use more of their resources for corn production, there are fewer resources available for breeding poultry.

 Maximum annual output options Quantity of Corn(pounds) Quantity of Poultry(pounds) 1 1200 0 2 1000 300 3 800 500 4 600 600 5 400 700 6 200 775 7 0 850
Poultry 900 750 600 450 300 150 200 400 600 800 1000 1200 Corn

Answer: This point will exist outside the production possibility frontier and it will be possible if there is change in technology, change in natural resources, change in labor force and change in humane capital.

• Draw a production possibility frontier with corn on the horizontal axis and poultry on the vertical axis illustrating these options, showing points 1–7.
• 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?

Answer: Opportunity cost of increasing the annual output of corn from 800 to 1000 pounds is equal to the 200 pounds of poultry. It means we have to forgo 200 pounds of poultry to increase the annual output of corn from 800 to 1000 pounds.

• What is the opportunity cost of increasing the annual output of corn from 800 to 1000 pounds?

Answer: We have to forgo 75 pounds of poultry to increase the annual output of corn from 200 to 400 pounds.

• What is the opportunity cost of increasing the annual output of corn from 200 to 400 pounds?

So the opportunity cost of increasing the annual output of corn from 200 to 400 pounds is equal to the 75 pounds of poultry.

Answer: In point 3 we have to forgo 200 pounds of poultry to increase output of corn by 200 pounds; here the unitary slope in nature as the same quantity is needed to forgo one good, to acquire the same quantity of other good.

• Can you explain why the answers to parts 3 and 4 above are not the same? What does this imply about the slope of the production possibility frontier?

In point 4 we have to forgo 75 pounds of poultry to increase output of corn by 200 pounds, in this case they forgo less to attain the same quantity i.e., 200 pounds of corn, so here the narrow slope in nature. The slope of PPF would get a concave shape, a curve like the inner surface of sphere because, the quantity of corn is increasing while the quantity of poultry decreasing.

References

• Beggs, Jodi. “The Production Possibilities Frontier.” About.com Economics. N.p., n.d. Web. 11 Apr. 2014. http://economics.about.com/od/production-possibilities/ss/The-Production-Possibilities-Frontier_4.htm.
• Riley, G. “Production Possibility Frontier (“PPF”).” tutor2u | Economics | Business Studies | Politics | Sociology | History | Law | Marketing | Accounting | Business Strategy. tuter2u, 23 Sept. 2012. Web. 10 Apr. 2014. http://tutor2u.net/economics/revision-notes/as-markets-production-possibility-frontier.html.
Content Points Possible Points Earned
Draw production possibility frontier (PPF) 3
Analyze feasible/infeasible production 2
Compute opportunity cost of increasing annual products 6
Explain the slope of the production possibility frontier 2
Analysis
Work demonstrates synthesis of concepts, research, and experience 3
Work demonstrates the student’s ability to tie relevant information to real-life applications. 2
Analysis exceeds basic comprehension to demonstrate higher-order thinking. 2
Writing Skills
Correct use of APA 6th edition format, all sources used to support the paper are referenced 2
Sentences are clear, concise, and direct; tone is appropriate, spelling, grammar, and punctuation are correct. 3
Total 25