# Question: an economy has a production possibility frontier given by x2...

###### Question details

An economy has a production possibility frontier given by X2 +
4Y2 = 100.

(i) Graph this ppf.

(ii) Calculate the opportunity cost of an extra unit of good X
when

a. X = 2 b. X = 8.

[Hint: you need ΔY/ΔX; either use calculus; or calculate Y when X=2
and X=3 to get an approximation. Excel might be helpful for
this.]

(iii) If consumers want to consume equal amounts of X and Y, how
much of each should be produced?

(iv) Now the country can trade. It produces only X, and for every
unit of X that it ships abroad it gets one unit of Y in return.
Graph this consumption possibility curve.

(v) Given that the country can trade on these terms, and that
consumers still want to consume equal quantities of X and Y, how
much X and Y will they consume?

(vi) How much does this country benefit by being able to trade?