TABLE OF CONTENTS

Question 1 of 4

Work It Out
true
true
You must read each slide, and complete any questions on the slide, in sequence.

Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

Maximum annual Output options Quantity of potatoes (pounds) Quantity of fish (pounds)
A 1,000 0
B 800 300
C 600 500
D 400 600
E 200 650
F 0 675
Table

Using the data in the table, which of the following graphs depicts the production possibility frontier with potatoes on the horizontal axis and fish on the vertical axis?

1:16
WIO_Krugman_Chapter02_01
Video Player is loading.
Current Time 0:00
Duration 0:00
Loaded: 0%
Stream Type LIVE
Remaining Time 0:00
 
1x
    • Chapters
    • descriptions off, selected

      Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes? Explain. Where would this point lie relative to the production possibility frontier?

      1:34
      WIO_Krugman_Chapter02_02
      Video Player is loading.
      Current Time 0:00
      Duration 0:00
      Loaded: 0%
      Stream Type LIVE
      Remaining Time 0:00
       
      1x
        • Chapters
        • descriptions off, selected

          Maximum annual Output options Quantity of potatoes (pounds) Quantity of fish (pounds)
          A 1,000 0
          B 800 300
          C 600 500
          D 400 600
          E 200 650
          F 0 675
          Table

          Assume the economy of Atlantis only produces fish (point F). Calculate the opportunity cost of producing potatoes in 200 pound increments.

          Maximum annual Output options Quantity of potatoes (pounds) Opportunity cost of Producing potatoes in terms of fish
          F 0 -
          E 200
          D 400
          C 600
          B 800
          A 1,000
          Table
          To calculate the opportunity cost of producing potatoes (in terms of producing fish) you must calculate the change in quantity of fish produced as potato production is increased. For example, as potato production increases from 0 to 200 pounds, fish production decreases from 675 to 650 pounds. So the opportunity cost of producing the first 200 pounds of potatoes is 25 pounds of fish. Similarly when increasing potato production from 200 to 400 pounds, the result is a decrease in fish production from 650 to 600 pounds. Increasing potato production from 600 to 800 pounds results in a decrease in the production of fish from 500 to 300 pounds, or an opportunity cost of 200 pounds of fish.
          Assume the economy of Atlantis only produces fish (point F). Calculate the opportunity cost of producing potatoes in 200 pound increments.
          To calculate the opportunity cost of producing potatoes (in terms of producing fish) you must calculate the change in quantity of fish produced as potato production is increased. For example, as potato production increases from 0 to 200 pounds, fish production decreases from 675 to 650 pounds. So the opportunity cost of producing the first 200 pounds of potatoes is 25 pounds of fish. Similarly when increasing potato production from 200 to 400 pounds, the result is a decrease in fish production from 650 to 600 pounds. Increasing potato production from 600 to 800 pounds results in a decrease in the production of fish from 500 to 300 pounds, or an opportunity cost of 200 pounds of fish.
          Assume the economy of Atlantis only produces fish (point F). Calculate the opportunity cost of producing potatoes in 200 pound increments.
          WIO_Krugman_Chapter02_03
          Video Player is loading.
          Current Time 0:00
          Duration 0:00
          Loaded: 0%
          Stream Type LIVE
          Remaining Time 0:00
           
          1x
            • Chapters
            • descriptions off, selected

              Which of the following statements regarding the opportunity cost of producing potatoes and the production possibilities frontier is true for the island of Atlantis?

              1:53
              WIO_Krugman_Chapter02_04
              Video Player is loading.
              Current Time 0:00
              Duration 0:00
              Loaded: 0%
              Stream Type LIVE
              Remaining Time 0:00
               
              1x
                • Chapters
                • descriptions off, selected