Question
Suppose an economy has a production possibility frontier characterized by the equation X2+ 4Y2= 100 a. In order to sketch this equation, first compute its
Suppose an economy has a production possibility frontier characterized by the equation X2+ 4Y2= 100
a. In order to sketch this equation, first compute its intercepts. What is the value of X if Y = 0? What is the value of Y if X = 0?
b. Calculate three additional points along this production possibility frontier. Graph the frontier and show that it has a general elliptical shape.
c. Is the opportunity cost of X in terms of Y constant in this economy, or does it depend on the levels of output being produced? Explain.
d. How would you calculate the opportunity cost of X in terms of Y in this economy? Give an example of this computation.
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