Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

a. Draw a production possibility frontier with potatoes on the horizontal axis and fish on the vertical axis illustrating these options, showing points A€“F.

b. Can Atlantis produce 500 kg of fish and 800 kg of potatoes? Explain. Where would this point lie relative to the production possibility frontier?

c. What is the opportunity cost of increasing the annual output of potatoes from 600 kg to 800 kg?

d. What is the opportunity cost of increasing the annual output of potatoes from 200 kg to 400 kg?

e. Can you explain why the answers to parts (c) and (d) are not the same? What does this imply about the slope of the production possibility frontier?

Transcribed Image Text:

Quantity of fish (kllograms) Quantity of potatoes (kllograms) Maximum annual output options A 1 000 800 300 500 600 650 675 600 600 400 200