### Exploring the Production-Possibilities Frontier

Here is a fairly complex example that illustrates most of what is important about production-possibilities frontiers.

4. The Dukedom of Scimonoce (it is a backward economy, hence its name) is a totally agricultural economy that grows only corn and/or oats. There is no trade with neighboring countries, and there are only five small plots of farmland that produce as follows:

 Plot either Corn or Oats A 50 10 B 40 10 C 30 10 D 20 10 E 10 10

a) If the country decides that it wants 30 units of oats produced, what is the largest amount of corn that can be produced? ____________ Which of the five plots do you plant in oats to get this result, and which do you plant in corn?
In Corn ________
In Oats_________

b) Given your answer in part (a), what is the opportunity cost of 10 more units of oats (increasing oat production from 30 to 40)?______________

c) Finish filling in the production-possibilities table below and plot the points on the graph.

 CORN OATS Plots Used for Corn Plots Used for Oats 150 0 ABCDE None 140 10 ABCD E ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ 0 50 None ABCDE

d) Where is the point 30 oats and 30 corn on the graph? (Label it X.) Is it possible to produce 30 units of corn and 30 units of oats? If you answer that 30 corn and 30 oats is attainable, explain how you get it, that is, where do you plant oats and where do you plant corn.

e) Is the production of 30 corn and 30 oats efficient?

f) Where is the point 40 oats and 60 corn on the graph? (Label it Y.) Is it possible to produce 40 oats and 60 corn? If you answer that 40 oats and 60 corn is attainable, explain your planting decision that makes it possible.

g) Will the dukedom produce up to its potential if plot A is left empty? What will happen to the production-possibilities frontier?

h) Suppose consumers decide that they want 1000 units of corn and 300 units of oats. Will anything happen to the production-possibilities frontier? Explain.

i) Suppose the owner of plot E finds a method to increase his (and only his) oat production to 20. Recompute the production-possibilities table and draw the new curve on the graph above.

j) Suppose that the dukedom has a dispute with a neighbor and loses plot E. What will happen to its production-possibilities frontier?

k) There are only two changes that will move a production-possibilities frontier, and parts i and j illustrate them. What are those two changes?

l) From the information given, can one tell which combination of oats and corn the dukedom should produce? Explain.