Hi! I'm having trouble with factors of production and Production Possibilities Frontier. Can anyone help me?

Question

1.) Ten years from now, do you think that the US economy will be bigger or smaller than it is now? Explain yourself in terms of the factors of production. Briefly explain what you think will change about each factor and why. (20% of assignment grade)

2.) Draw a Production Possibilities Frontier for a hypothetical economy that only produces apples and oranges. Show an efficient point, an inefficient point, and an “unattainable” point. Label each point in terms of how many apples and oranges each one represents. Also, label both endpoints of the PPF on the chart’s vertical and horizontal axis. (40% of assignment grade)

3.) Suppose a new tractor is introduced that has a small effect on apple production but a large effect on orange production. Draw the new Production Possibilities Frontier and label each endpoint. (40% of assignment grade)

If you can please help me, I would appreciate it! It's due this Tuesday. I just simply can't grasp the concepts and I read the book

Answer 1

OK the PPF shows how resources can be divided up between two goods (it can be more, but for this example let's just say 2.)

Answering question 2 first: If you put apples on the y axis, and all your resources go to making apples, then you will produce say, 100 apples and 0 oranges.  Now draw out a bowed line (it is bowed because of diminishing marginal returns, but forget about that for now) that intersects the x axis at some number for oranges.  You can make it up but the line will not curve back in on itself (if you can use your resources to make 10 apples an 90 oranges, then why would you use all your resources for oranges if you could only get 85?)

That's how you draw a PPF.  Any point inside the line is "inefficient".  That means that you could use your resources to produce more goods.  Any point ON the line is "efficient" which means that you couldn't use your resources to produce more goods.  That leaves any point OUTSIDE the line to be "unattainable" meaning that you cannot produce that amount with the resources you have now.

Now lets move on to #3.  To begin with, move the y-intercept (how many apples you could produce if you only made apples) up just a little.  Now move the x-intercept out a lot, because the new tractor will help you make a lot more oranges.  Draw another bowed out curve and label it like your teacher wants.  

Back to #1.  Think about the US resources.  Do you think it is more likely that we will have more or less Labor, Land, Capital, and Technology (these are the factors of production) in 10 years?  I can tell you, we will not have more land unless we invade another country.  Labor (measured roughly by population) will most likely increase, as will capital and technology, unless something awful happens and people leave the US,  or there is some kind of disaster that takes all our capital (plant & equipment) and technology away.  So it is likely that the economy will be larger than it is now.  It grows at about 2%-3% per year, historically, maybe a little slower in the last year or two.  

That should set you on the right track and I hope you understand the concept of the PPF a little better now!