# Production Possibilities and Resource Allocation: Microeconomics Help!

• davie08
In summary, at point D in the diagram, the production of 2 more units of bicycles would cost 2 units of computers due to the opportunity cost of producing bicycles being equal to the slope of the production possibilities curve. This is because resources are fully employed and any increase in production of one good must come at the expense of producing less of the other good.
davie08
Microeconomics help!(5-5)

## Homework Statement

Refer to the above diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:

a)cannot be realized because resources are fully employed.

b)will cost 1 unit of computers.

c)will cost 2 units of computers.

d)will cause some resources to become unemployed.

## The Attempt at a Solution

these questions always screw me up but I'm pretty sure it would cost 2 computers for the production of 2 more bicycles.

Last edited:

Hello,

You are correct, the production of 2 more units of bicycles would cost 2 units of computers at point D in the diagram. This is because the opportunity cost of producing bicycles is equal to the slope of the production possibilities curve (PPC) at that point, which is 2 computers. This means that in order to produce 2 more bicycles, 2 units of computers must be given up. This is because resources are fully employed and any increase in the production of one good must come at the expense of producing less of the other good.

I hope this helps. Let me know if you have any other questions about microeconomics.

## 1. What is microeconomics?

Microeconomics is a branch of economics that focuses on individual economic agents such as households, firms, and industries. It examines how these agents make decisions regarding the allocation of scarce resources to satisfy their unlimited wants and needs.

## 2. What are the key principles of microeconomics?

The key principles of microeconomics include supply and demand, opportunity cost, marginal analysis, and incentives. Supply and demand determines the prices of goods and services in the market. Opportunity cost is the value of the next best alternative that must be given up in order to make a decision. Marginal analysis examines the costs and benefits of small changes in economic decisions. Incentives are rewards or penalties that influence the behavior of economic agents.

## 3. How does microeconomics differ from macroeconomics?

Microeconomics focuses on individual economic agents, while macroeconomics looks at the economy as a whole. Microeconomics examines the choices and behaviors of consumers, producers, and markets, while macroeconomics looks at broader economic indicators such as GDP, inflation, and unemployment.

## 4. What are some real-world applications of microeconomics?

Microeconomics has many real-world applications, such as determining the prices of goods and services, analyzing consumer behavior, understanding market competition, and evaluating government policies. It also helps businesses make strategic decisions, such as setting prices and determining the optimal level of production.

## 5. How can I apply microeconomics concepts to my daily life?

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