WIO2: Work It Out - Ch. 2: Economic Models: Trade-offs and Trade

Trade-Offs and Trade Work It Out: Question 3 of 4 Assume the economy of Atlantis only produces fish (point F). Calculate the opportunity cost of producing potatoes in 200 pound increments. Maximum annual output options Quantity of potatoes (pounds) Quantity of fish (pounds) A 1,000 0 B 800 300 C 600 500 D 400 600 E 200 650 F 0 675 Opportunity cost of increasing production from 0 pounds to 200 pounds of potatoes: _____________________ pounds of fish. Opportunity cost of increasing production from 200 pounds to 400 pounds of potatoes: _____________________ pounds of fish. Opportunity cost of increasing production from 400 pounds to 600 pounds of potatoes: _____________________ pounds of fish. Opportunity cost of increasing production from 600 pounds to 800 pounds of potatoes: _____________________ pounds of fish. Opportunity cost of increasing production from 800 pounds to 1,000 pounds of potatoes: _____________________ pounds of fish.

25 50 100 200 300

Trade-Offs and Trade Work It Out: Question 2 of 4 Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes? Explain. Where would this point lie relative to the production possibility frontier?

No, Atlantis cannot produce 500 pounds of fish and 800 pounds of potatoes. This point will lie outside the production possibilities frontier.

Trade-Offs and Trade Work It Out: Question 1 of 4 Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish. Using the data in the table, place the points in the accompanying graph to depict Atlantis's production possibilities frontier. Maximum annual output options Quantity of potatoes (pounds) Quantity of fish (pounds) A 1,000 0 B 800 300 C 600 500 D 400 600 E 200 650 F 0 675

Pay attention to the curve you have the data to solve the problem: Plot all the numbers correctly on the curve. potatoes = X axis Fish = Y axis (X , Y)

Trade-Offs and Trade Work It Out: Question 4 of 4 Which of the following statements regarding the opportunity cost of producing potatoes and the production possibilities frontier is true for the island of Atlantis?

The island of Atlantis has an increasing opportunity cost of producing potatoes and the production possibility frontier is bowed outward.