Page 51 - The Principle of Economics

CHAPTER 3 INTERDEPENDENCE AND THE GAINS FROM TRADE 49
HOURS NEEDED TO
MAKE 1 POUND OF:
AMOUNT PRODUCED
Table 3-1
THE PRODUCTION OPPORTUNITIES OF THE FARMER AND THE RANCHER
FARMER RANCHER
MEAT
20 hours/lb 1 hour/lb
POTATOES
10 hours/lb 8 hours/lb
MEAT
2 lbs 40 lbs
IN 40 HOURS POTATOES
4 lbs 5 lbs
(a) The Farmer’s Production Possibilities Frontier
Figure 3-1
THE PRODUCTION POSSIBILITIES FRONTIER. Panel (a) shows the combinations of meat and potatoes that the farmer can produce. Panel (b) shows the combinations of meat and potatoes that the rancher can produce. Both production possibilities frontiers are derived from Table 3-1 and the assumption that the farmer and rancher each work 40 hours per week.
A
Meat (pounds)
2
1
0
Meat (pounds)
40
20
0
2 4
Potatoes (pounds)
(b) The Rancher’s Production Possibilities Frontier
B
2 1/2 5 Potatoes (pounds)