Draw a production possibilities frontier (PPF) with missiles on the horizontal axis and butter on the vertical axis, illustrating these options, showing points A – F. Option missiles butter A 0 30 B 1 28 C 2 24 D 3 18 E 4 10 F 5 0 What is the opportunity cost of increasing butter production from 18 – 24 units? What is the maximum amount of butter that can be produced, if all resources are devoted to butter production? Can this country produce 2 missiles and 10 units of butter? Yes or no? Where would this point lie relative to the PPF? Suppose the information given in question 2 represents the PPF1. Draw a new PPF diagram and illustrate what happens when the missile sector experiences an increase in new resources and technology. Show both PPF1 and PPF2 on your graph.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Draw a production possibilities frontier (PPF) with missiles on the horizontal axis and butter on the vertical axis, illustrating these options, showing points A – F.

Option missiles butter

A 0 30

B 1 28

C 2 24

D 3 18

E 4 10

F 5 0

What is the opportunity cost of increasing butter production from 18 – 24 units?
What is the maximum amount of butter that can be produced, if all resources are devoted to butter production?
Can this country produce 2 missiles and 10 units of butter? Yes or no? Where would this point lie relative to the PPF?

Suppose the information given in question 2 represents the PPF1. Draw a new PPF diagram and illustrate what happens when the missile sector experiences an increase in new resources and technology. Show both PPF1 and PPF2 on your graph.

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