XERCISE 1 Below is a production possibilities table for consumer goods (Food) and capital goods (Robots): A B C D E Food 0 1 2 3 4 Robots 10 9 7 4 0 1. Show these data graphically. Upon what specific assumptions is this production possibilities curve based? 2. If the economy is at point C, what is the cost of one more food? Of one more robot? Explain how the production possibilities curve reflects the law of increasing opportunity costs. 3. If the economy characterized by this production possibilities table and curve were producing 3 food and 2 robots, what could you conclude about its use of available resources?
EXERCISE 1
Below is a production possibilities table for consumer goods (Food) and capital goods
(Robots):
A B C D E
Food 0 1 2 3 4
Robots 10 9 7 4 0
1. Show these data graphically. Upon what specific assumptions is this production
possibilities curve based?
2. If the economy is at point C, what is the cost of one more food? Of one more
robot? Explain how the production possibilities curve reflects the law of
increasing
3. If the economy characterized by this production possibilities table and curve
were producing 3 food and 2 robots, what could you conclude about its use of
available resources?
4. What would production at a point outside the production possibilities curve
indicate? What must occur before the economy can attain such a level of
production?
EXERCISE 2
Explain how (if at all) each of the following affects the location of a country’s production
possibilities curve:
1. The quality of education increases.
2. The number of
3. A new technique improves the efficiency of extracting iron from ore.
4. A devastating earthquake destroys numerous production facilities.
EXERCISE 3
Mention the following statements which are normative and the one which is positive.
(a) Should tuition fees increase, fewer students would obtain a post-secondary
education.
(b) The Minister announced that Bahrain is the most friendly country in the world.
(c) Interest rates should be lower in Bahrain so that people can afford to build a home.
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