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The economy of Olympus produces only two consumer goods; thunderbolts and manna. Only labour is required to produce both goods, and the economy's labour force
The economy of Olympus produces only two consumer goods; thunderbolts and manna. Only labour is required to produce both goods, and the economy's labour force is fixed at 100 workers. The table below indicates the daily output of thunderbolts and manna produced with various quantities of labour. Number of Workers Daily Thunderbolt Production Number of Workers Daily Manna Production (kg) 0 0 20 10.0 20 150 40 20.0 40 250 60 25.0 60 325 80 27.5 80 375 100 30.0 100 400 a) What is the opportunity cost of producing the second 10 thunderbolts? What is the opportunity cost of producing the third 10 thunderbolts? What happens to the opportunity cost of thunderbolts as their production is continuously increased? (3 marks) b) Suppose that actual production levels for a given period were 27.5 thunderbolts and 50 kg of manna. What does this tell you about output in Olympus? (1 mark) c) Suppose Zeus (the central planner in this economy) were to call for an output combination of 25 thunderbolts and 325 kg of manna. Is this plan attainable? Explain. (1 mark)
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