Describe the law of increasing opportunity costs
Course:- Business Economics
Reference No.:- EM131200224

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1. Suppose that a society’s production possibilities for food and tractors is as follows: Points on the PPF Food

(millions of tons) Tractors (millions)

A 0 30

B 4 28

C 8 24

D 15 20

E 16 14

F 20 8

G 24 0

a. Draw the Production Possibilities Frontier (PPF).

b. Suppose that the society produces 20 million tons of food and 8 million tractors per year. Is it operating on the PPF. If not, what factors may account for this?

c. What is the total opportunity cost of increasing production of food from 15 to 16 tons per year?

d. Describe the Law of Increasing Opportunity Costs.

e. Does this PPF follow this law? Briefly explain.

Consider the PPF you drew for part (a). Which points along this PPF are efficient and which are not (if, any)? Explain.

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