Q31. An economy produces two goods: Wheat and Cloth. The following table summarises its production possibilities. Calculate the marginal opportunity cost of producing more Cloth in place of Wheat at various combinations. What does it indicate? Draw the Production Possibility Curve. What is the shape of the curve? Wheat 100 90 70 40 10 0 Cloth 0 25 50 75 85 87 10 marks
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1
Answer:
Watches (Millions) Shoes (Thousands) Marginal Opportunity Cost
0 90,000 -
1 80,000
1
10,000
=10,000
2 68,000
1
12,000
=12,000
3 52,000
1
16,000
=16,000
4 34,000
1
18,000
=18,000
5 10,000
1
24,000
=24,000
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11
Explanation:
shape of the curve is concave .
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