A country can achieve some combination of goods outside its production possibilities curve by
A. Buying the debt of foreign nations
B. Producing more capital goods and fewer consumer goods
C. Idling some of its resources
D. Specializing and engaging in international trade
A country can achieve some combination of goods outside its production possibilities curve by
A. Buying the debt of foreign nations
B. Producing more capital goods and fewer consumer goods
C. Idling some of its resources
D. Specializing and engaging in international trade
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Problem 1
Below is a production possibilities table for consumer goods (food) and capital goods (machinery). Graph the data using Excel and then answer the following questions.
|
A |
B |
C |
D |
E |
F |
|
|
FOOD |
0 |
10 |
20 |
30 |
40 |
50 |
|
MACHINES |
150 |
140 |
120 |
90 |
50 |
0 |
(a) What are the specific assumptions that underlie the production possibilities curve?
(b) What would be the cost of more food if the economy is at point C? What would be the cost of producing more machinery? How does the shape of the production possibilities curve reflect the law of increasing opportunity costs?
(c) What if this hypothetical economy were producing only 9 food and 130 machines and it was depicted by this production possibilities table and curve? What conclusions could be drawn about this economy's resource utilization?
(d)Can this economy produce outside its current production possibilities? How can technological changes affect the production possibilities curve? How can international trade permit consumption above its production possibilities curve?
