Production Possibility Frontier

Running head: Production possibility frontierEfficient and inefficient production:
Name:The diagram below shows the possibility
University:production frontier of hats and boots:
Course:From the diagram above production point A
Instructor:depicts efficient production; point B shows
Date:inefficient production while point C cannot be
Production possibility frontier:achieved with the current resources.
The production possibility curve is a curve thatOpportunity cost:
represents the number of two different goodsThis section discusses the opportunity cost of
that can be produced given certain resource,producing one extra boot, given that the current
(Hardwick, 2002) in this case the economicproduction is at 1500 boots and 2500 hats, then
resource is labour hours, the maximum number ofproducing one extra boot will yield the following
labour hours is 75,000 per week, the number ofresults:
hours spent makings cowboy boots is 25 hoursBoots = 1500 + 1 = 1501
whereas making a cowboy hat is 15 hatsNumber of hours on boots = 1501 X 25 hours =
Therefore provided information is as follows:37525 hours
75,000 hours per week making boots and hatsRemaining labour hours = 75000 – 37525 =
Cowboy boots = 25 hours37475
Cowboy hat = 15 hoursNumber of hats that can be produced = 37475
The maximum number of boots that can be15 = 2498.333
produced in one week is calculated as follows:Change in the number of hats = 2500 - 2498.333
Maximum Boots =75000/ 25 = 3000 boots= 1.666667
The maximum number of hats that can produceTherefore the opportunity cost of producing one
in one week is calculated as follows:boot is 1.6667 hats.
Maximum hats =75000/ 15 = 5000hatsIncreased resources:
Using excel we calculate the number of hats andIf resources increase whereby labour hours
boots that will be produced, the following tableincrease to 95000 then the number of hats and
summarises the results:bootsboot hoursboots that can be produced increases,
(number of boots X 25)maximum hoursremainingThe following table summarises the results of an
hours after boots are madeincrease in labour hours from 75000 to 95000:
(maximum hours -(number of boots XThe maximum number of boots that can be
25))number of hats with remaining hoursproduced in one week is calculated as follows:
(remaining hours/15)Maximum Boots =90000/ 25 = 3600 boots
0The maximum number of hats that can produce
0in one week is calculated as follows:
75000Maximum hats =90000/ 15 = 6000hats
75000The table below shows the combinations of the
5000number of hats and boots that can be
500produced:bootsboot hoursmaximum
12500hoursremaining hours after boots are
75000madenumber of hats with remaining hours
625000
4166.6670
100090000
2500090000
750006000
50000500
3333.33312500
150090000
3750077500
750005166.66667
375001000
250025000
200090000
5000065000
750004333.33333
250001500
1666.66737500
250090000
6250052500
750003500
125002000
833.333350000
300090000
7500040000
750002666.66667
02500
062500
The following table summarises the number of90000
boots and hats that can be produced:number of27500
bootsnumber of hats1833.33333
03000
500075000
50090000
4166.66666715000
10001000
3333.3333333600
150090000
250090000
20000
1666.6666670
2500The production possibility curve shifts upwards as
833.3333333follows:
3000From the chart the new frontier results from an
0increase in resources, therefore the point c which
Using the above data the production possibilitywas previously not achievable can not be
frontier will be as follows, the diagram wasachieved with the increase in labour hours.
created using excel