Question 9

The following is a set of hypothetical production possibilities for a nation:

Combination

Turkeys (thousands)

Chickens (thousands)

A

0

20

B

4

18

C

8

14

D

12

8

E

16

0

(a)What is the opportunity cost of the first 8,000 chickens produced?

[2 marks]

(b)Between which production points is the opportunity cost per thousand turkeys the highest?

[2 marks]

(c)Does this production possibilities frontier reflect the law of increasing opportunity costs? Explain.

[2 marks]

(d)Suppose a new strand of bird flu emerges but only affects turkeys. Will this affect the amount of chicken that will be produced? Explain.

[2 marks]

(e)Suppose the country is producing 14 (thousand) turkeys and 2 (thousand) chickens. Is this level of production efficient? Explain.