Understanding Opportunity Costs Production Possibilities Curve and Efficiency Points

Understanding Opportunity Costs Production Possibilities Curve and Efficiency Points

Question 1

Opportunity costs are the benefits a person, investor, or business enterprise sacrifices when they choose one option over other possible choices. The benefits forgone when making such a decision may be overlooked because one does not see them when making such a decision. However, one must be aware of the potential benefits they forego when choosing to make the right decision.

Question 2

By attending class, one sacrifices some monetary and social engagement benefits that they would have instead attended to. For instance, by paying tuition fees, one abandons other utilities they would have used the money on, like buying fancy meals and drinks. Non-monetary opportunity costs include engaging in sporting activities or going for a regular hike. Our assignment help will hone your writing prowess for papers that will awe your professors.

Question 3

The production possibilities frontier is a combination of two goods that can be produced in a given period using a given state of technology with full resource utilization. Take the case of a farmer living on an Island who engages in pineapple and coconut farming. Such a farmer can only produce a constant quantity of pineapples and coconuts. If they have to make any adjustment in either pineapples or coconuts quantity, they have to give up either to maintain production.

Question 4

An efficiency point in a production possibilities frontier refers to an equilibrium point in the curve. It is the point at which an entity produces the right quantities of two goods. For instance, an efficiency point for a state is the point where the state makes what it uses to satisfy its local needs while leaving enough for export purposes. The production efficiency point is that an entity cannot produce more of one good without leaving out the other.

Question 5

Given a combination of two goods, say pineapples and coconut, there are three Pareto efficient points. If the total production units are 10, then efficient points occur when one produces ten units of pineapples and zero units of coconuts, five units each for both, or ten units of coconuts and zero units of pineapples.

Question 6

Pareto efficient point

Question 7

Pareto inefficient point

Question 8

A shift to the right (outward movement) occurs when the economy grows, producing more. Economic growth means an entity/state can acquire more raw materials and produce them efficiently.

Advances in technology also bring new production capabilities, which eventually boost the production of goods. Besides, new technology is more efficient than old technology, which means enhanced production.

The employment of a new division of labor also boosts production since new specializations come up. Once new domains come up, a firm’s staff can focus on producing various activities that stimulate output in the long run.

Question 9

Countries trade with each other when they cannot satisfy their needs and wants on their own. As a result, they exchange by exploiting domestic resources, a surplus they use to exchange for the goods they lack. Import trade also occurs because goods from outside are more appealing to the consumer or are cheaper to produce than locally produced goods.

Question 10

The US uses trade restrictions as a way of protecting local manufacturers from international competition. Although foreign trade gives consumers the freedom they need, it is not an ideal economic situation. Companies based in China, for instance, access cheap labor. Without trade restrictions, Chinese goods will flood the local market to the detriment of local manufacturers, hence the need to restrict them. Among other purposes, US import restrictions;

Protect local companies from foreign competition.

Protect local consumers from substandard goods.

Prevent dumping tendencies by foreign companies.

Reference

Arnold, R. (2019). MACROECONOMICS (Thirteenth Edition, pp. 41–57). Cengage.

Your task is to complete all assigned questions to the best of your ability. Best of luck!

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Define opportunity costs.
Identify at least two non-monetary and monetary opportunity costs you forgo to attend classes online.
What is a Production Possibilities Curve (Frontier)?

How do you determine, which points are efficiency points on the Production Possibilities Curve (Frontier)?
Identify at least three points on the Production Possibilities Curve (Frontier) that are efficient points.
What are three ways in which the Production Possibilities Curve (Frontier) may shift to the right?
Explain why countries engage in trade.
Identify and discuss trade restrictions as they pertain to the United States. Identify at least three reasons why the United States imposes trade restrictions on importing countries.