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A country is capable of producing the following combinations of books and CDs per period of time, assuming that it makes full use of

 

A country is capable of producing the following combinations of books and CDs per period of time, assuming that it makes full use of its resources of land, labour and capital. Number of books Number of CDs Number of books 40 30 20 10 a) Draw the production possibility curve for this country in the graph below and explain in details what does it represent? 0 40 0 10 30 20 20 Why? Explain your answer for each. (i) 10 books and 15 CDs. (ii) 30 books and 40 CDs. 20 10 35 40 30 Number of CDs b) Is it possible for this country to produce the following combinations of books and CDs? 40 0 45 50 c) What is the opportunity cost (in terms of CDs) of producing 20 extra units of books when this country is initially producing 10 books. Explain your answer.

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