Research Proposal on "Economics A) the Production Possibility Curve"

Research Proposal 4 pages (1071 words) Sources: 2 Style: Harvard

[EXCERPT] . . . .

Economics

a) the production possibility curve, which is also referred to as the transformation curve, illustrates the relationship between various levels of production rates between two categories of goods produced in a given period of time. In other words, the production possibility curve reveals the levels of production that can be attained with given amounts of resources.

In our case, the production possibility curve will be described for a country only producing goods and services. The combination of goods and services to be described by the production possibility curve are listed below:

Units of GOODS: A: 0, B: 10, C: 20, D: 30, E: 40, F: 50, G: 60, H: 70, I: 80, J: 90, K: 100.

Units of SERVICES: A: 80, B: 79, C: 77, D: 74, E: 70, F: 65, G: 58, H: 48, I: 35, J: 19, K: 0.

Production Possibility Curve

Point a in the diagram shows that 0 units of goods and 80 units of services can be produced efficiently. Point B. In the diagram shows that 10 units of goods and 79 units of services can be produced efficiently. Point C. In the diagram shows that 20 units of goods and 77 units of services can be produced efficiently. Point D. In the diagram shows that 30 units of goods and 74 units of services can be produced efficiently. Point E. In the diagram shows that 40 units of goods and 70 units of services can be produced efficiently. Point F. In the diagram shows that 50 units of goods and 65 units of services can be produced efficiently. Point G. In the diagram shows that 60 units of goods and 58 units of services can be produced efficiently. Point H. In the diagram shows that 70 units of goods and 48 units of services can be produced efficiently. Point I in the diagram shows that 80 units of goods and 35 units of services can be produced efficiently. Point J. In the diagram shows that 90 units of goods and 19 units of services can be produced efficiently. Point K. In the diagram shows that 100 units of goods and 0 units of services can be produced efficiently.

All the a, B, C, D, E, F, G, H, I, J, K points are located on the curve. This means that these points are productively efficient, but they could be less profitable than other points located on the curve, depending on market demand (Wikipedia, 2008).

A b) at the current moment of time, the country is producing 40 units of goods and 70 units of services. If the country would produce 50 units of goods, it means the production of services would decrease to 65 units. Therefore, the opportunity cost between 40 units of goods and 50 units of goods is 5 units of services.

A c) the opportunity cost includes both explicit costs and implicit costs. Explicit costs consist in dollars paid out for a choice. Implicit costs consist in the value of something sacrificed when no direct payment is made (Hall & Leiberman, 2004).

Therefore, in our case, in order to increase the quantity of goods produced, the country must allocate resources used in producing services, which… READ MORE

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