The table above shows the production possibilities frontier for the nation of Isolanda
a) Find the marginal cost of a pound of fish using the above PPF.
b) How does the marginal cost of a pound of fish change as more fish are caught?
Fish
(pounds) Marginal cost
(pounds of berries)
0.5 5
1.5 10
2.5 15
3.5 20
a) The table above shows the marginal cost of a pound of fish. Remember that marginal cost is calculated at the mid-point, that is, midway between the two production possibilities. For instance, moving from production point A to production point B has an opportunity cost of 5 pounds of berries per pound of fish. Because this movement gains 1 pound of fish, the marginal cost is 5 pounds of berries. We then attribute this marginal cost to the point midway between points A and B, which is 0.5 pounds of fish per pound of berries.
b) As more fish are caught, the marginal cost of a fish increases.
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