The figure represents the production possibility curve of a nation, Use it to answer the questions that follow (a) What is the opportunity cost of: i. produ...

(a) Opportunity cost

1. The opportunity cost of producing 30 tonnes of cocoa is 60 bales of textiles forgone.
2. When textile production increases from 30 bales to 40 bales, cocoa production falls from 25 tonnes to 20 tonnes. Therefore, the opportunity cost is:
   \[25 - 20 = 5\text{ tonnes of cocoa}.\]
   Thus, the opportunity cost is 5 tonnes of cocoa.

(b) Interpretation of the points

1. Point Y: This point lies within the production possibility curve. It shows under-utilisation or unemployment of available resources. The nation can produce more of one or both goods with its existing resources.
2. Point G: This point lies on the production possibility curve. It shows full and efficient utilisation of the nation’s available resources.
3. Point X: This point lies outside the production possibility curve. It is presently unattainable with the nation’s available resources and technology.

(c) Conditions that can enable production at point X

1. Improvement in technology.
2. Discovery or acquisition of additional natural resources.
3. Increase in investment and capital goods.

Other acceptable conditions include research and invention, improvement in human capital, reduction of waste, and economic growth.

(d) Basic economic concepts illustrated

1. Scarcity.
2. Choice.
3. Opportunity cost.

(e)

1. A production possibility curve is a curve showing the maximum possible combinations of two goods that a nation can produce with its available resources and given level of technology when resources are fully and efficiently employed.
2. The slope of the production possibility curve shows the opportunity cost of producing more of one commodity. That is, an increase in the production of textiles requires a reduction in the quantity of cocoa produced, and vice versa.