Two important industries on the island of Bermuda are fishing and tourism. Data shows that, in 2009, a total of 306 fishermen in Bermuda caught 387 metric tons of marine fish. And
the 2,719 people employed by hotels produced 5,54,400 hotel stays (measured by the number
of “visitor arrivals”). Suppose that this production point is efficient. Assume also that the
opportunity cost of 1 additional metric ton of fish caught is 2,000 hotel stays lost and that
this opportunity cost is constant (i. e., it doesn’t change).
(a) If all 306 fishermen were to be employed by hotels (in addition to the 2,719 people already
working in hotels), how many hotel stays could Bermuda produce?
(b) If all 2,719 hotel employees were to become fishermen (in addition to the 306 fishermen
already working in the fishing industry), how many metric tons of fish could Bermuda
catch?
(c) Draw a production possibility frontier (PPF) for Bermuda, with “fish caught” on the
horizontal axis and “hotel stays” on the vertical axis. In this PPF, indicate Bermuda’s
actual production point for the year 2009.