Problem
Life is Good is a remote island in the Atlantic. The inhabitants grow wheat and breed poultry. The accompanying table shows the maximum annual output combinations of Wheat and poultry that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for wheat production, there are fewer resources available for breeding poultry.
Maximum annual output Quantity of wheat Quantity of Poultry
options
(pounds)
(pounds)
1
1200
0
2
1100
300
3
900
450
4
600
600
5
400
725
6
200
775
7
0
850
1. What is the opportunity cost (in terms of poultry given up) of increasing the annual output of wheat from 900 to 1100 pounds? (10% of grade)
2. What is the opportunity cost (in terms of poultry given up) of increasing the annual output of wheat from 200 to 400 pounds? (10% of grade)