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Wonderland has 100 workers and produces only two goods: apple and orange. Labour is the only factor of production, but some workers are better suited
Wonderland has 100 workers and produces only two goods: apple and orange. Labour is the only factor of production, but some workers are better suited to producing apple than orange (and vice versa). The table below shows the maximum levels of output of each good possible from various levels of labour input. Number of Workers Annual production of Number of Workers Annual Production of Producing Apple Apple Producing Orange Orange 0 0 100 250 25 20 75 200 50 35 50 150 75 10 25 80 100 50 0 0 a. Draw the production possibilities boundary for Wonderland, with the production of orange on the horizontal axis and the production of apple on the vertical axis. b. Compute the opportunity cost of producing extra 15 apples if the economy is initially producing 20 apples and 200 oranges. c. If the economy is producing 30 apples and 80 oranges, what is the opportunity cost of producing extra 10 apples? d. Suppose now that the labours in Wonderland figure out a new way to grow orange, and the maximum level of orange that can be produced from any given level of labour input increases by 10%. Show in a diagram what happens to the production possibilities curve
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