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Table 2-6 -Refer to Table 2-6

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Table 2-6
 Possible Output  Combinations  Apples  (thousands of  pounds)  Pears  (thousands of  pounds)  A 700 B 6020 C 5036 D 4048 E 3056 F 2060 G 1063 H 065\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Possible Output } \\\text { Combinations }\end{array} & \begin{array} { c } \text { Apples } \\\text { (thousands of } \\\text { pounds) }\end{array} & \begin{array} { c } \text { Pears } \\\text { (thousands of } \\\text { pounds) }\end{array} \\\hline \text { A } & 70 & 0 \\\hline \text { B } & 60 & 20 \\\hline \text { C } & 50 & 36 \\\hline \text { D } & 40 & 48 \\\hline \text { E } & 30 & 56 \\\hline \text { F } & 20 & 60 \\\hline \text { G } & 10 & 63 \\\hline \text { H } & 0 & 65 \\\hline\end{array}
-Refer to Table 2-6.The Fruit Farm produces only apples and pears.The table above shows the maximum possible output combinations of the two fruits using all resources and currently available technology.
a.Graph The Fruit Farm's production possibilities frontier.Put apples on the horizontal axis and pears on the vertical axis.Be sure to identify the output combination points on your diagram.
b.Suppose The Fruit Farm is currently producing at point D.What is the opportunity cost of producing an additional 8,000 pounds of pears?
c.Suppose The Fruit Farm is currently producing at point D.What happens to the opportunity cost of producing more and more pears? Does it increase,decrease,or remain constant? Explain your answer.
d.Suppose The Fruit Farm is currently producing at point G.What happens to the opportunity cost of producing more and more apples? Does it increase,decrease,or remain constant? Explain your answer.
e.Suppose The Fruit Farm is plagued by the apple maggot infestation which destroys apple trees but not pear trees.Show in a graph what happens to its PPF.

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Definitions:

Depreciation

The systematic reduction in the recorded cost of a fixed asset to allocate its cost over its useful life, reflecting wear and tear, decay, or obsolescence.

Net Income

The total profit or loss of a company after all expenses, including taxes and operating costs, have been deducted from revenues.

Indirect Method

The indirect method is a way of reporting cash flows from operating activities by starting with net income and adjusting for non-cash transactions.

Capital Structure

The mix of various forms of external funds and equity that a company uses to finance its operations and growth.

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