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Suppose the United States can produce cattle or corn with a given amount of resources. Attached is a graph depicting the production possibility frontier for the United States and the marginal benefit and cost of a bushel of corn. You are asked to discuss the relationship between the marginal cost and marginal benefit of corn and the production of both corn and cattle. Production Possibility Frontier MC 40 30 B 20 MB 15 10 15 20 Bushels of Corn 10 20 Quantity of Bushels of Corn (in billions) (in billions) (a) Determine whether there is an overallocation of resources, underallocation of resources, and optimal allocation of resources. For example, at 10 billion bushels of corn production, what are the marginal cost and marginal benefit? MB: . Do they meet the marginal principle of MB=MC? (Yes, No) If not, what problem happens? There an ( underallocation, overallocation ) of resources to corn production. Similarly mention in case of at 15 billion bushels and 20 billion bushels. What are the marginal cost and marginal benefit? MB: MC: MC: MC: . at 15 billion MB: _at 20 billion So the marginal principle of MB=MC happens at_ billion bushels of corn production. (b) When operating at the optimum level of corn production, what is the optimal level of cattle production? Any cattle production that is less than 30 billion pounds would incur: ( underproduction, overproduction) Any cattle production that is more than 30 billion pounds would incur: cattle (in billions of pounds). Cattle (in billions of pounds) Marginal Benefit and Marginal Cost

Suppose the United States can produce cattle or corn with a given amount of resources. Attached is a graph depicting the production possibility frontier for the United States and the marginal benefit and cost of a bushel of corn. You are asked to discuss the relationship between the marginal cost and marginal benefit of corn and the production of both corn and cattle. Production Possibility Frontier MC 40 30 B 20 MB 15 10 15 20 Bushels of Corn 10 20 Quantity of Bushels of Corn (in billions) (in billions) (a) Determine whether there is an overallocation of resources, underallocation of resources, and optimal allocation of resources. For example, at 10 billion bushels of corn production, what are the marginal cost and marginal benefit? MB: . Do they meet the marginal principle of MB=MC? (Yes, No) If not, what problem happens? There an ( underallocation, overallocation ) of resources to corn production. Similarly mention in case of at 15 billion bushels and 20 billion bushels. What are the marginal cost and marginal benefit? MB: MC: MC: MC: . at 15 billion MB: _at 20 billion So the marginal principle of MB=MC happens at_ billion bushels of corn production. (b) When operating at the optimum level of corn production, what is the optimal level of cattle production? Any cattle production that is less than 30 billion pounds would incur: ( underproduction, overproduction) Any cattle production that is more than 30 billion pounds would incur: cattle (in billions of pounds). Cattle (in billions of pounds) Marginal Benefit and Marginal Cost

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter2: Choice In A World Of Scarcity
Section: Chapter Questions
Problem 2SCQ: Return to the example in Figure 2.4. Suppose there is an improvement in medical technology that...
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6. Suppose the United States can produce cattle or corn with a given amount of resources. Attached is a graph depicting the production possibility frontier for the United States and the marginal benefit and cost of a bushel of corn. You are asked to discuss the relationship between the marginal cost and marginal benefit of corn and the production of both corn and cattle. Production Possibility Frontier MC $9 40 30 B 20 3 MB 10 15 20 10 15 20 Bushels of Corn Quantity of Bushels of Corn (in billions) (in billions) (a) Determine whether there is an overallocation of resources, underallocation of resources, and optimal allocation of resources. For example, at 10 billion bushels of corn production, what are the marginal cost and marginal benefit? MB: Do they meet the marginal principle of MB=MC? (Yes, No) If not, what problem happens? There an ( underallocation, overallocation ) of resources to corn production. MC: Similarly mention in case of at 15 billion bushels and 20 billion bushels. What are the marginal cost and marginal benefit? MB: MC: at 15 billion at 20 billion billion bushels of corn production. MB: MC: So the marginal principle of MB=MC happens at (b) When operating at the optimum level of corn production, what is the optimal level of cattle cattle (in billions of pounds). production? Any cattle production that is less than 30 billion pounds would incur: ( underproduction, overproduction) Any cattle production that is more than 30 billion pounds would incur: Cattle (in billions of pounds) Marginal Benefit and Marginal Cost
Transcribed Image Text:6. Suppose the United States can produce cattle or corn with a given amount of resources. Attached is a graph depicting the production possibility frontier for the United States and the marginal benefit and cost of a bushel of corn. You are asked to discuss the relationship between the marginal cost and marginal benefit of corn and the production of both corn and cattle. Production Possibility Frontier MC $9 40 30 B 20 3 MB 10 15 20 10 15 20 Bushels of Corn Quantity of Bushels of Corn (in billions) (in billions) (a) Determine whether there is an overallocation of resources, underallocation of resources, and optimal allocation of resources. For example, at 10 billion bushels of corn production, what are the marginal cost and marginal benefit? MB: Do they meet the marginal principle of MB=MC? (Yes, No) If not, what problem happens? There an ( underallocation, overallocation ) of resources to corn production. MC: Similarly mention in case of at 15 billion bushels and 20 billion bushels. What are the marginal cost and marginal benefit? MB: MC: at 15 billion at 20 billion billion bushels of corn production. MB: MC: So the marginal principle of MB=MC happens at (b) When operating at the optimum level of corn production, what is the optimal level of cattle cattle (in billions of pounds). production? Any cattle production that is less than 30 billion pounds would incur: ( underproduction, overproduction) Any cattle production that is more than 30 billion pounds would incur: Cattle (in billions of pounds) Marginal Benefit and Marginal Cost
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