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 2

6

37 45 50 55 59 66 77 80

Machinery (units) 90 89 8

5

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?

(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.