Question

Note: Write your response with a complete sentence (to get the full marks) in the space provided; no attachments or email will be considered for marking.

Consider an economy that produces only food and clothing. Its production possibilities boundary is shown below.

What do we know about the use of resources when the economy is at point a and e. Please provide the reasoning for your answer. (1 point)
Which of points b, c, and e is efficient? Please provide the justification for your answer. (1 point)
If the economy is at point e, what is the opportunity cost of producing one more tonne of clothing? Please provide the reasoning for your answer (1 point)
What is the opportunity cost of moving from point a to point c? Please provide the reasoning behind your answer (1 point)
What do we know about the use of resources at point d? How would it be possible for the economy to produce at point d? (1 point)

Answer 1

Point A represents inefficient use of resources and Point E represents efficienct use of resources. Any point lying on the PPF curve is an efficient use of resources and and any point lying inside the PPF such as Poni A is underutilization