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2. Given the following production possibilities table for war goods (missiles) and civilian goods (automobiles), answer the next four questions. (4 points)

Types of Production

Production Alternatives

A

B

C

D

E

Auto (in million)

0

2

4

6

8

Missiles ( in thousands)

30

27

21

12

0


a. Is the PPC a linear line or a curve? Why so?

Note: You may draw the PPC for your own, but no need to submit the graph for this assignment.

b. If the economy is currently at point (or alternative) B, what is the opportunity cost of producing 2 million more autos?

c. Suppose that the economy is operating at a point inside the curve (PPC), not on the curve. What does it mean? Why does it happen?

d. If there is an increase in economic resources, what would happen to the production possibilities curve?

3. Indicate what happens in the denim jeans market if the following occurs? (Your answer should be one of the following: increase in demand, decrease in demand, increase in supply, decrease in supply, increase in the quantity demanded, decrease in the quantity demanded, increase in the quantity supplied, or decrease in the quantity supplied. For some questions, there may be two possible answers, but listing only one is acceptable). Make sure to justify your answer (explain why). (4 points)

a. the new technology that cuts the time to manufacture a pair of denim jeans
b. a rise in the price of a pair of denim jeans
c. a fall in the price of the cloth, used in the production of denim jeans
d. a fall in the price of denim skirts

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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