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Assume that the economy of Fruitland can produce two goods, apples (A) and bananas (B). The production of one apple requires one unit of
Assume that the economy of Fruitland can produce two goods, apples (A) and bananas (B). The production of one apple requires one unit of labor (L) and two units of capital (K). One banana requires two units of labor and one unit of capital. Fruitland is endowed with 300 units of labor and 300 units of capital. a. Draw the production possibilities frontier (curve) for Fruitland. Put apples (A) on the vertical axis. (HINT: For every 10 apples, determine how many bananas can be produced. How many apples and bananas can be produced if all resources are devoted to apples? If 10 less apples are produced, how many bananas can be produced? 20 less? Etc. Construct a table, and then graph it. It is helpful to include in your table the resources being devoted to the production of each good as well as the total amounts of labor and capital being used.) b. Is the production of 100 apples and 100 bananas feasible? Efficient? What about 120 apples and 120 bananas? c. What can be said about the utilization of resources when 50 apples and 50 bananas are produced? d. What is the opportunity cost of increasing the production of apples from 140 to 150? From 0 to 10 units?
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