Question

The typical Canadian worker is able to produce 100 board feet (a unit of measure) of lumber or 1000 light bulbs per year. The world price of a board foot of lumber is $20 and that of a light bulb is $1. Draw the production possibilities frontier for the average Canadian worker by manipulating the line segment labeled PPF.

Answer 1

Answer:

Explanation:

In the Canadian country, it is possible that the country is able to produce either 100 units of lumber or 1000 lightbulbs. Then, 100 lumber is equal to 1000 bulbs in the home, and hence, one lumber is equivalent to 10 bulbs. Therefore, the opportunity cost of lumber in the home is ten bulbs.

Thus, the country's production possibilities frontier PPF is a linear combination of 100 lumber and 1000 bulbs. The graphical diagram of the production possibilities frontier PPF can be seen in the image below.