Question

option a b c d e f large engines 0 1 2 3 4 5 small engines 25 24 21 16 9 0 a) draw a production possibilities graph for the plant. b) what are the opportunity costs of producing (i) the first large engine? (ii) the second large engine? (iii) five large engines? c) on the graph, mark a point “x” to show the inefficient use or underutilization of the plant’s resources. d) suppose the plant received orders to produce five large engines and nine small engines. mark a point “z” to show this production possibility, and comment whether or not it would be attainable.

Explanation:

Step1: Define axes for PPF

Let x-axis = Large Engines, y-axis = Small Engines. Plot points: (0,25), (1,24), (2,21), (3,16), (4,9), (5,0). Connect points to form PPF.

Step2: Calculate 1st large engine OC

OC = Small engines lost: $25 - 24 = 1$

Step3: Calculate 2nd large engine OC

OC = Small engines lost: $24 - 21 = 3$

Step4: Calculate 5th large engine OC

OC = Small engines lost: $9 - 0 = 9$

Step5: Mark inefficient point X

Point X: Any point inside the PPF (e.g., (1,20)), as it uses fewer resources than maximum.

Step6: Check attainability of point Z

Point Z: (5,9). Compare to PPF point (5,0). $9 > 0$, so outside PPF.

Answer:

a) [Production Possibilities Graph: A downward-sloping concave curve connecting (0,25), (1,24), (2,21), (3,16), (4,9), (5,0), with x-axis labeled "Large Engines" and y-axis labeled "Small Engines"]
b)
(i) 1 small engine
(ii) 3 small engines
(iii) 9 small engines
c) [Point X plotted at any coordinate inside the PPF curve, e.g., (1, 20), representing unused resources]
d) [Point Z plotted at (5,9), which lies outside the PPF curve. This production level is not attainable with current resources and technology.]