One Point on a PPF Shows Production Levels at 50

question 325

Multiple Choice

One point on a PPF shows production levels at 50 tons of coffee and 100 tons of bananas. Remaining on the PPF, an increase of banana production to 140 tons shows coffee production at 30 tons. Still remaining on the PPF, coffee production at 10 tons allows banana production at 160 tons. The opportunity cost of a ton of bananas is

• A) constant because coffee production decreased by the same amount each time.
• B) 16 to 1, that is every 1 ton of coffee given up will result in 16 more tons of bananas.
• C) decreasing, since the increase in banana production is less at each point considered.
• D) increasing from 1/2 ton of coffee per ton of bananas to 1 ton of coffee per ton of bananas.

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Definitions:

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

Market Basket

A selected set of goods and services used to track changes in prices and measure inflation over time; represents the typical consumption of a household.

Nominal GDP

The aggregate price of every ultimate good and service generated within a nation over a certain period, valued in the current monetary rates without modifications for inflationary changes.

Hyperinflation

A very high rate of inflation.