Draw a Production Possibility Curve (PPC) for Rice and Corn given the following data points. Label the axes and plot the points. What is the name of the curve and what is its shape? State two assumpti

Here are the solutions to your questions:

a) Step 1: To present the information on a graph paper:

• Draw a horizontal axis (x-axis) labeled "Rice (tons)" and a vertical axis (y-axis) labeled "Corn (tons)".
• For the horizontal axis, use a scale where $1 \text{ cm}$ represents $5 \text{ tons}$ of Rice.
• For the vertical axis, use a scale where $1 \text{ cm}$ represents $10 \text{ tons}$ of Corn.
• Plot the following points:
  • J: $(0, 120)$
  • K: $(5, 80)$
  • L: $(20, 40)$
  • M: $(35, 20)$
  • N: $(47, 10)$
  • P: $(70, 0)$
• Connect these points with a smooth curve.

b) i) Step 2: The name of the curve is the Production Possibility Curve (PPC) or Production Possibility Frontier (PPF). Its shape is convex to the origin.

ii) Step 3: Two assumptions in drawing such a curve are:

• The quantity of resources (land, labor, capital) available is fixed.
• The level of technology used in production is fixed.

c) Step 4: To calculate the opportunity cost of $1 \text{ ton}$ of Rice in terms of Corn:

• From J to K: Gain $5 \text{ tons}$ of Rice, lose $40 \text{ tons}$ of Corn. Opportunity cost of $1 \text{ ton}$ of Rice $= \frac{40}{5} = 8 \text{ tons of Corn}$.
• From K to L: Gain $15 \text{ tons}$ of Rice, lose $40 \text{ tons}$ of Corn. Opportunity cost of $1 \text{ ton}$ of Rice $= \frac{40}{15} \approx 2.67 \text{ tons of Corn}$.
• From L to M: Gain $15 \text{ tons}$ of Rice, lose $20 \text{ tons}$ of Corn. Opportunity cost of $1 \text{ ton}$ of Rice $= \frac{20}{15} \approx 1.33 \text{ tons of Corn}$.
• From M to N: Gain $12 \text{ tons}$ of Rice, lose $10 \text{ tons}$ of Corn. Opportunity cost of $1 \text{ ton}$ of Rice $= \frac{10}{12} \approx 0.83 \text{ tons of Corn}$.
• From N to P: Gain $23 \text{ tons}$ of Rice, lose $10 \text{ tons}$ of Corn. Opportunity cost of $1 \text{ ton}$ of Rice $= \frac{10}{23} \approx 0.43 \text{ tons of Corn}$.

Observation: The opportunity cost of producing $1 \text{ ton}$ of Rice decreases as more Rice is produced.

d) Step 5: The technical terms for the combinations are:
i. $10 \text{ tons}$ of Rice and $40 \text{ tons}$ of Corn: Inefficient production or Underutilization of resources.
ii. $70 \text{ tons}$ of Rice and $0 \text{ ton}$ of Corn: Efficient production or Full employment of resources.

e) Step 6: Four factors that can cause the curve drawn in a) to shift inwards are:

• A decrease in the quantity of available resources (e.g., a decline in the labor force or destruction of land).
• A decrease in the quality of resources (e.g., soil degradation or less educated workforce).
• Technological regression or a decline in production methods.
• Natural disasters or widespread conflict that destroy productive capacity.