Assessment Question Week 2:

Production Possibility Frontier (PPF)

Question 1

In 2017, Nepal’s production of rice and machinery was published by the Nepal Bureau of Statistics (NBS) as indicated by the table below:

Based on the table above, a production possibility frontier (PPF) for Nepal can be plotted as below:

Use the NBS production table and production possibility frontier to answer the following questions:

A. Name positions B, V and D. Also, as indicated in the table, supposing Nepal is operating at level T, what is the opportunity cost of producing 10,000 more tons of rice?

B. Use the graph below to answer the questions that follow:

B1: Suppose Nepal begins to manufacture fertilizers.  Explain the impact of the discovery of fertilizers on Nepal’s economy using one of the PPF above.

B2: Also, supposing there is a discovery of steel in Nepal, explain the impact of steel on the economy of Nepal using one of the PPF above.

B3: Finally, the Minister of Finance in Nepal advices the World Bank that in order to increase rice production and machinery, each sector requires USD 50 billion, or a total of 100 billion. This 100 billion is made available by the World Bank. Explain the impact of these 100 billion budgetary allocations to the economy of Nepal. Use one of the PPF above.