Use the following production possibilities table for war goods and civilian goods to answer questions a to e.
Production alternatives
Type of product
A
B
C
D
E
Cars (in millions)
0
2
4
6
8
Guided missiles (in thousands)
30
27
21
12
0
a. Graph the data in the table. Are there constant or increasing opportunity costs for the production of missiles?
b. If the economy is currently at point C:
- What is the cost of one million more cars?
- What is the cost of one thousand more guided missiles?
c. Label a point G inside the curve of the graph. What does it indicate?
d. Label a point H that lies outside the PPF curve.
- What does this point indicate?
- What must occur before the economy can attain the level of production indicated by point H?
e. Suppose improvement occurs in the technology of producing guided missiles but not in the production of cars.
- Draw the new PPF curve on the graph you created.
- Now draw a curve that reflects technological improvement in the production of both products.
Use the following production possibilities table for war goods and civilian goods to answer questions a to e.
|
|
Production alternatives |
||||
|
Type of product |
A |
B |
C |
D |
E |
|
Cars (in millions) |
0 |
2 |
4 |
6 |
8 |
|
Guided missiles (in thousands) |
30 |
27 |
21 |
12 |
0 |
a. Graph the data in the table. Are there constant or increasing opportunity costs for the production of missiles?
b. If the economy is currently at point C:
- What is the cost of one million more cars?
- What is the cost of one thousand more guided missiles?
c. Label a point G inside the curve of the graph. What does it indicate?
d. Label a point H that lies outside the PPF curve.
- What does this point indicate?
- What must occur before the economy can attain the level of production indicated by point H?
e. Suppose improvement occurs in the technology of producing guided missiles but not in the production of cars.
- Draw the new PPF curve on the graph you created.
- Now draw a curve that reflects technological improvement in the production of both products.
Related textbook solutions
Related questions
[ MICROECONOMICS ]
Exercise 1. Use the following production possibilities table for war goods and civilian goods to answer questions a to e.
|
|
Production alternatives |
||||
|
Type of product |
A |
B |
C |
D |
E |
|
Cars (in millions) |
0 |
2 |
4 |
6 |
8 |
|
Guided missiles (in thousands) |
30 |
27 |
21 |
12 |
0 |
a. Graph the data in the table. Are there constant or increasing opportunity costs for the production of missiles?
b. If the economy is currently at point C:
- What is the cost of one million more cars?
- What is the cost of one thousand more guided missiles?
c. Label a point G inside the curve of the graph. What does it indicate?
d. Label a point H that lies outside the PPF curve.
- What does this point indicate?
- What must occur before the economy can attain the level of production indicated by point H?
e. Suppose improvement occurs in the technology of producing guided missiles but not in the production of cars.
- Draw the new PPF curve on the graph you created.
- Now draw a curve that reflects technological improvement in the production of both products.
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?
