Explain why, in an economy that produces only fish and computers and is working at eficiency, the 50

Explain why, in an economy that produces only fish and computers and is working at eficiency, the 500th computer made will cost more in twrms of fish than the 450th computer made.

Explain why, in an economy that produces only fish and computers and is working at eficiency, the 500th?nortin

This is the concept of production possibility curve / frontier.. If an economy is working at efficienct, it must be operating on the production possibilty crube (ppc) meaning for any given output it produces of computers, it would be producing the maximum possible output of fish (and for any given output of fish, it would be producing the maximum possible output of computers) given the fixed amount of resources it has. We must note that the underlying assumption is that the production possibilities are marked by diminishing marginal productivities. Thus, as the economy increases it output of fisn (alternatively, computers), the marginal unit of fish (alternatively computers) would consume progressively large amounts of the inputs/ resources/ factors of production. The two combinations of output being considered in the question are (450 units of computers and F1 unit of fish) and (500 units of computers and F2 units of fish). Clearly, F1 is more than F2 because as you increase the output of computers from computers from 450 units to 500 units you have to reduce your output of fisn so that resources earlier used for fish production can be used to produce more output. Due to the operation of declining marginal productivity of resources in production of any of the goods, the 500th computer will need more resouces to produce compared with the 450th computer: on the other hand, marginal productivity of resources for producing fish will be higher for fish production at F2 level than at F1 (higher) level. So, the greater amont of resouces transferred from production of fish to computers when producing the 500th computer will mean a greater fall in fish production as compared with the situation whebn the 450th unit of production was being produced. Thus, the marginal rate of transformation of fish to computers falls as more and more computers are being produced: this means one has to give up larger amount of fish production in order to produce the 500th computer than was necessary when the 450th computer was being produced.