Assessment Question Week 2: Production Possibility Frontier

In 2017, Nepal production of rice and machinery in 2017 was published by the Nepal Bureau of Statistics as indicated by the table below.

Production in Nepal

P

Q

R

S

T

U

V

W

X

Y

Z

Rice (1000 tons)

0

10

26

37

45

50

55

59

66

77

80

Machinery (units)

90

89

85

80

75

70

65

60

50

30

0

Based on the table above, a production possibility frontier for Nepal can be plotted as below:

Use the Nepal production table and production possibility frontier to answer the following questions.

(a)Name positions B, V and D. Explain the implications of each of the production positions (B, V, D) on Nepal's economy.

(b)Supposing Nepal is operating at level T what is the opportunity cost of producing 10,000 more tons of rice? Also, suppose Nepal is operating at X what is the opportunity cost of producing 70 units of machinery?

(c)Use the graph below to answer the questions that follow

(i)Suppose Nepal begins to manufacture fertilizers, explain the impact of the discovery of fertilizers to Nepal's economy using PPF.

(ii)Supposing there is a discovery of steel in Nepal, explain the impact of steel to the economy of Nepal using a PPF.

(iii)The Minister of Finance in Nepal advices that in order to increase rice production and machinery, each sector requires USD 50 billion. Explain the impact of the budgetary allocation on the economy of Nepal using PPF.