08 Jun Question a nation with fixed quantities of
Question
a nation with fixed quantities of resources is able to produce any following combination of bread and ovens.
Loaves of bread (millions) ovens (Thousands)
75 0
60 12
45 22
30 30
15 36
0 40
these figures assume that a certain number of previously produces oven are available in the current period for baking bread.
a. Using the data in the table, graph the ppf( with ovens on the vertical axis).
b. Does the principle of increasing “opportunity cost” hold in this nation? Explain briefly. (hint: What happens to the opportunity cost of bread- measured in number of ovens as bread production increase?)
c. if this country chooses to produce both oven and breads, what will happen to the ppf over time? why?
Now suppose that a new technology is discovered that allows twice as many loaves of bread to be baked in each exsiting oven.
d. Illustrate ( on your original graph) the effect of this new technology on ppf.
e. Suppose that before the new technology is introduced, the nation produces 22 ovens. After the new technology is introduced, the nation produces 30 ovens. what effect of the new technology on production of bread ? (give the number of loaves before and after the change)
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