Refer to the above figure. If the farmer has 50 acres of land, the farmer is producing at point a, and an acre of land yields 400 bushels of beans or 800 bushels of wheat, how much land is devoted to the production of wheat?

Question

Quizplus · Accepted Answer

At point a, the slope of the production possibility frontier (PPF) is -0.5 (change in wheat over change in beans). This means that to produce one additional bushel of wheat, the farmer must give up 2 bushels of beans.

Since an acre of land can yield either 400 beans or 800 wheat, the opportunity cost of producing wheat is to give up 2 acres of beans (800/400=2).

If the farmer has 50 acres of land, the maximum number of acres that can be allocated to wheat is:

50 acres x (800 bushels wheat/acre) / (2 bushels beans/bushels wheat) = 20 acres wheat

Therefore, the remaining 30 acres must be allocated to beans.

The answer is 20 - 50 * 0.4 = 20 - 20 = 12.

Refer to the Above Figure