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The McStevens Fruit Farm produces only oranges and papaya. Table 1 below shows the maximum possible output combinations of the two fruits using all resources
- The McStevens Fruit Farm produces only oranges and papaya. Table 1 below shows the maximum possible output combinations of the two fruits using all resources and currently available technology.Answer the questions below and show calculations where appropriate. (35 points)
- Graph the Fruit Farm's production possibilities frontier. Put oranges on the horizontal axis and papayas on the vertical axis. Be sure to identify the output combination points on your diagram. (15pt)
Table 1
McStevens Fruit Farm | ||
Possible Output Combinations | Oranges | Papayas |
(thousands of kilos) | (thousands of kilos) | |
A | 140 | 0 |
B | 120 | 20 |
C | 100 | 38 |
D | 80 | 52 |
E | 60 | 64 |
F | 40 | 74 |
G | 20 | 80 |
H | 0 | 82 |
- Suppose the Fruit Farm is currently producing at point C. What is the opportunity cost of producing an additional 14,000 kilos of papayas? (10pt)
- Suppose the Fruit Farm is plagued by a maggot infestation which destroys orange trees but not papayas. Explain with a graph what happens to the PPF. (10pt)
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