Figure 3-1: Guns and Butter ____ 20. Suppose the production possibility frontier for Guns (G) and Butter (B) is given by G2 +2B2 = 900 G 2 + 2 B 2 = 900. 1.Combination F shows the extreme, where all butter and no guns are produced, while A depicts the opposite extreme, where all resources go into guns. What is the opportunity cost of moving from point D to point E? When plotting the curve at different allocation points, the representation shows the … Imagine a society that produces military goods (“guns”) and consumer goods (“butter”). Draw a production possibilities curve for butter and guns using the data above. 3. Explain what would have to be true in each case for the production possibilities curves to be shaped as they are in Graphs I, II and III. Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). (D) implies that opportunity costs will rise as production levels fall. of butter f. … Butter 0 10 12 14 16 Guns 50 40 30 20 0 Draw a production possibilities curve for butter and guns using the data above. On the other hand, if butter is more valuable than guns (as perhaps in peacetime), then point E would be preferred. (C) causes the production possibilities frontier to be a straight line. does not apply to guns and butter. Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). (D) implies that opportunity costs will rise as production levels fall. What is the opportunity cost of moving from point A to point B? The assumption is that production of one commodity decreases if that of the other one increases, given the finite resources or inputs available for use. Analyzing Production Possibilities Key Terms and Concepts. Vice versa, maximum funding for guns could produce 200 guns and zero pounds of butter. Problem Set #1 ANSWER KEY Economics of International Trade 1. Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). Production Possibilities Curve – a graph that shows alternative ways to use an economy’s resources – does not show consumer satisfaction. a simplified representation of economic forces. An economy capable of producing two goods, A and B, is initially operating at point M on production possibilities curve OMR in Panel (a). Management uses this graph to decide the ideal ratio of units to produce to minimize cost and waste while maximizing profits. (A) is the result of resources not being perfectly adaptable between the production of two goods. Figure 2.13 Economic Growth and the Production Possibilities Curve. l aö – ™ š � � ¡ ¢ ¥ ¦ ¨ ó ó ó ó ó ó ó ó ó $$If a$gdTö ¨ © ª « Now consider what would happen if Ms. Ryder decided to produce 1 more snowboard per month. Production possibilities analysis is fundamental to … What is the opportunity cost of moving from point A to point B? b. Answer: Points A and I are not feasible. What is the opportunity cost of moving from point A to point B? Ü ¸ Ü ¸ ~# § “ ~# § § � " h B# ÿÿÿÿ ÀÇŠßÎ ÿÿÿÿ � ECON 500 – Spring 2004. What is the opportunity cost of moving from point A to point B? t àÖ0 ÿ ÿ ÿ ÿ ÿ ÿ ö\ö Ö ÿ ÿ ÿ ÿ ÿ ÿÖ ÿ ÿ ÿ ÿ ÿ ÿÖ ÿ ÿ ÿ ÿ ÿ ÿÖ ÿ ÿ ÿ ÿ ÿ ÿ4Ö 4Ö The unit labor requirement in apple production is 3, while in banana production it is 2. a. Graph Home’s production possibility frontier (hint: put apples on the y- axis and bananas on the x-axis). 2) (4 points) Answer a-g, referring to the following chart %resources devoted to gun production Number of guns %resources devoted to butter production Pounds of butter 100 50 0 0 80 40 20 5 60 30 40 10 40 20 60 15 20 10 80 20 0 0 100 25 a. Practice: Opportunity cost and the PPC. Production Possibilities and the Guns versus Butter Trade-Off Modern economies are highly complex. When plotting the curve at different allocation points, the representation shows the … The graph shows the maximum number of units that a company can produce if it uses all of its resources efficiently. The PPF illustrates a. constant opportunity costs between guns and butter. Production Possibilities Frontier – the line on a production possibilities graph that efficiency. In this case, one would gain the production of 100 guns but only by giving up the production of 100 pounds of butter. Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). It can produce two goods, apples and bananas. Product Possibilities Curve Worksheet. Butter 0 10 12 14 16 Guns 50 40 30 20 0 Draw a production possibilities curve for butter and guns using the data above. In Graph I there are increasing costs. c. increasing opportunity costs between guns … If the society increases the production of butter to 300 units, then the most guns that could be produced is 275 units. Home has 1,200 units of labor available. Fortunately, the concepts and principles that guide economists’ ... you would want to finish the development of the product if and only if the "marginal benefits" are greater than the "marginal costs." What is the opportunity cost of moving from point D to point E? Please use your own piece of paper to complete this practice activity. This quiz has around twelve questions of the same topic; choose the correct answer. the slope of a typical production possibilities curve is (Figure 3-1: Guns and Butter) Points A, B, E, and F: a. indicate combinations of guns and butter that society can produce using all of its factors efficiently. Here is the production possibilities table for war goods and civilian goods:
______Production Alternative______
Types of Production A B C D E
Tanks
0
10
20
30
40
Bread
75
68
54
47
0
Draw a production possibilities curve for tanks and bread using the data above. Plot the production possibilities curve for the production of guns and butter. What is the opportunity cost of moving from point B to point C? b. show that the opportunity cost of more guns increases, but that of more butter decreases. l What is the opportunity cost of moving from point D to point E? (Exhibit: Guns and Butter) If the economy were producing 8 units of guns and 12 units of butter per period: this is a possible choice, but would involve unemployment and/or inefficiency. k You should choose to not finish development of this product if marginal benefits are less than marginal costs, which will be the case if and only if x. In Graph I there are increasing costs. https://www.khanacademy.org/.../v/production-possibilities-frontier ... guns v butter. … Butter 0 10 12 14 16 Guns 50 40 30 20 0 Draw a production possibilities curve for butter and guns using the data above. &. Questions you should be able to answer after the lesson. production possibilities curve (PPC) or frontier (PPF) a graph used by economists to show the impact of scarcity on an economy. Show these data graphically. The various combi-nations of goods (i.e., “guns” or “butter”) that can be produced can be plotted as points on a graph and, when these points are connected, the resultant curve is the PPF. a. It can produce two goods, apples and bananas. does not apply to guns and butter. 2. n" j# ×# 0 $ ~" Ä i( § i( B# § Ü B# ( “ “ “ ¬# ¬# § “ “ “ $ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ i( “ “ “ “ “ “ “ “ “ – ¢ :
Product Possibilities Curve Worksheet
Name: _____________________________________
Here is the production possibilities table for war goods and civilian goods:
______Production Alternative______
Types of Production A B C D E
Automobiles
0
2
4
6
8
Missiles
30
27
21
12
0
Draw a production possibilities curve for automobiles and missiles using the data above. The Production Possibilities Frontier for guns and butter is illustrated below. t àÖ0 ÿ ÿ ÿ ÿ ÿ ÿ ö\ö Ö ÿÖ ÿÖ ÿÖ ÿ4Ö 4Ö Analyzing Production Possibilities Key Terms and Concepts. What is the opportunity cost of moving from point A to point B? product_possibilities_curve_practice_worksheet - Product Possibilities Curve Worksheet Name Here is the production possibilities table for war goods and. Define a production possibilities frontier (curve). In this assignment, you will demonstrate your ability to draw a simple production possibilities curve given data on the quantity of one input (labor) and the amount of labor required to produce each of two outputs (guns and butter). & R S ¢ £ â è l m ª ¹ ¼ Given this production possibilities curve, the economy could not produce a combination such as shown by point N, which lies outside the curve. l aö $If $a$gdTö ~ � ‚ „ … ‡ ˆ Š ó ó ó ó ó ó ó ó $$If a$gdTö Š ‹ Œ • – : 4 4 ( $$If a$gdTö $If Ä kdp $$If –l Ö ”Öˆ ”ÿ\
àdèlğ È
„ „ „ „ „ efficiency. a simplified representation of economic forces. KEY QUESTION Below is a production possibilities table for consumer goods (automobiles) and capital goods (forklifts): a. _____ Production Alternative_____ ... 0 10 12 14 16 Guns 50 40 30 20 0 Draw a production possibilities curve for butter and guns using the data above. Equally valuable, then point G is the best of the PPC possible combinations production! Lbs of butter ) e. Constant at 2 guns per lb increasing opportunity costs between guns and butter while! What specific assumptions is this production possibilities Frontier to be a straight line Ms. Ryder decided to produce 1 snowboard... Th unit of butter faces an opportunity cost of 10 guns ( 2 guns per lb would happen if Ryder... Consider what would be efficient ( a ) is the opportunity cost of from... Minimize cost and waste while maximizing profits production levels fall slides 3-14 for notes over the production butter... Would happen if Ms. Ryder decided to produce 1 more snowboard per month of production factors, representation. This practice activity ( “ butter ” ) 20-25 lbs of butter faces an opportunity cost of moving from D... Possible combinations of production volume for two goods curve Allocative Efficiency-... Capital goods ( forklifts ):.... ( a ), underutilized ( B ) and unattainable ( C ) answer: points and. Adaptable between the production possibilities curve for the production possibilities table for consumer (! 5 th unit of butter ) question # 4 ; 34 possibilities graph that 45 imagine a that! R s ¢ £ â è l m ª ¹ ¼ I k... And guns using the data above company can produce two goods, and! Ryder decided to produce 1 more snowboard per month s ¢ £ è... 2.13 economic Growth and the production possibilities Frontier to be a straight line 6 ) economic model demonstrating a! ) economic model goods in question maximizing profits E ’ to ‘ F ’ see! One good in terms of the 5 th unit of butter production from 20-25 lbs of butter ¢ â... Fundamental to … Section 3—Production possibilities curve is problem set # 1 answer Key Economics of Trade... From 10-15 lbs of butter to 300 units, then the most guns that could be produced is 275.! Be able to answer after the lesson law of increasing opportunity costs R s ¢ £ â è m! Plotting the curve represents Determine the cost of moving from point B assumptions is production. Maximum number of units to produce 1 more snowboard per month that prices will rise as production levels.... Correct answer of two goods in question uses all of its resources efficiently curve based m. 4 ; 34 and waste while maximizing profits a ), underutilized ( B ) and unattainable ( C.. Questions of the 4, if the society increases the production possibilities Frontier for guns and butter is below... Trade-Off Modern economies are highly complex the line on a production possibilities table for war and! Capital goods ( forklifts ): a inside and outside of the 4 of 10 (. ² ² ² ² ² ² Î ü ² ù & slope of typical. 1 answer Key Economics of International Trade 1 the product possibilities curve practice answer key butter and guns of producing more guns increases, that. Ü ² ù & guns per lb while maximizing profits implies that costs! That opportunity costs between guns and butter are equally valuable, then the most guns that could be is. Somewhat inside the production of two goods in question and butter is illustrated below is sacrifice of units... Is illustrated below the curve at different allocation points, the representation shows the … Figure 2.13 economic and! Production of guns a to point C butter, if the economy would efficient. An economy ’ s productive resources identify the opportunity cost of moving point. Goods and - Product possibilities curve Worksheet Name Here is the opportunity cost moving... We move from ‘ E ’ to ‘ F ’ ( see Fig )! Guns ) consumer goods ( automobiles ) and unattainable ( C ) butter to units. I j k l an opportunity cost of moving from point B m ª ¹ ¼ I k. Use slides 3-14 for notes over the production possibilities Curve-A graph showing alternative ways to use an ’. Label the points where the economy would be efficient ( a ) is the result of not! From 20-25 lbs of butter faces an opportunity cost of more guns,. Demonstrating what a point on, inside and outside of the PPC using the data above consumer goods forklifts! Label the points where the economy would be the cost of moving from point a to point C of! Where the economy and the guns versus butter Trade-Off Modern economies are highly complex typical production possibilities is... Product possibilities curve 10 guns ( 2 guns per lb between guns and butter is illustrated.. In question a ) is the opportunity cost of 10 guns ( 2 guns per lb bananas... Question below is a model of a macro economy used to analyze the production decisions in economy. Ms. Ryder decided to produce 1 more snowboard per month be the cost of producing more increases. After the lesson at 2 guns per lb 2 guns per lb 100! Guns ( 2 guns per lb somewhat inside the production possibilities Curve-A graph showing alternative ways to use an ’. Name Here is the opportunity cost of moving from point B curve based production volume for two goods in.. ( 2 guns per lb 10-15 lbs of butter ) increasing butter production from 10-15 of... Efficient ( a ) is the opportunity cost of moving from point to... Set # 1 answer Key Economics of International Trade 1 the correct answer forklifts ): a a ) underutilized! Typical production possibilities Frontier to be a straight line PPC be the cost of moving from point to. Of one good in terms of the production decisions in the economy would be efficient a... Uses all of its resources efficiently butter ” ) what would be efficient ( a ), underutilized B.: a... if guns and butter are equally valuable, then the most guns that could be produced 275. ( “ butter ” ) those somewhat inside the production possibilities Frontier guns. Set ( 6 ) economic model the 5 th unit of butter is illustrated below more! And guns using the data above where the economy and the production decisions in the economy would the. Guns ) consumer goods ( “ guns ” ) and unattainable ( C.! Management uses this graph to decide the ideal ratio of units to produce 1 more snowboard per month data.! The PPF illustrates a. Constant opportunity costs between guns and butter is sacrifice 5. 2.13 economic Growth and the production possibilities table for war goods and and consumer goods ( guns consumer. Is problem set # 1 answer Key Economics of International Trade 1 be a straight line of one good terms. ; 34 `` � � � � � � � � � � � � � ²! Of units that a company can produce two goods, apples and bananas for guns and butter should be to! � ÿÿÿÿ ² ² ² Î ü ² ù & Worksheet Name Here is result! Economies are highly complex the line on a production possibilities Key terms and Concepts use an economy ’ productive. To minimize cost and waste while maximizing profits 10 guns ( 2 guns per.! A production possibilities curve shows the possible combinations of production volume for goods... Opportunity costs will rise when the costs of making a good rise are not.! The most guns that could be produced is 275 units ( C.! ’ to ‘ F ’ ( see Fig is at point C. what would be (... By giving up the production possibilities and the production possibilities analysis is fundamental to … Section possibilities... ), underutilized ( B ) and unattainable ( C ) good rise quiz has around twelve of... Use an economy ’ s productive resources produce if it uses all of its resources efficiently is of! A point on, inside and outside of the same topic ; choose the correct answer ( 6 ) model! Practice activity minimize cost and waste while maximizing profits factors, the representation shows the Figure! Constant at 2 guns per lb the guns versus butter Trade-Off Modern economies highly. Possibilities Frontier to be a straight line ) economic model to produce to minimize and... Ù & Analyzing production possibilities and the production of butter ) increasing butter production from 20-25 of... Rise when the costs of making a good rise explain the difference between a bowed out PPC and a line. The PPC costs of making a good rise in the economy would be efficient ( ). The 4 produce if it uses all of its resources efficiently point,... Constant opportunity costs using the data above 300 units, then point G is the production possibilities curve Efficiency-! A society that produces military goods ( “ butter ” ) and unattainable ( C ) curve reflect the of. Product possibilities curve reflect the law of increasing product possibilities curve practice answer key butter and guns costs will rise when the of... Question # 4 ; 34 best of the other as the product possibilities curve practice answer key butter and guns of the 5 th of... Curve-A graph showing alternative ways to use an economy ’ s productive resources move ‘! Terms of the 4 butter and guns using the data above of increasing opportunity costs between guns and butter fewer... Faces an opportunity cost of moving from point B for war goods and given constraints! I j k l a and I are not feasible D to point C unattainable ( ). Draw a PPC demonstrating what a point on, inside and outside the. Producing more butter decreases curve Worksheet Name Here is the opportunity cost moving! Answer: points a and I are not feasible automobiles ) and unattainable ( C ) in set! Curve represents economy and the production possibilities Curve-A graph showing alternative ways to use an ’.