Terms in this set (6) economic model. Practice: Opportunity cost and the PPC. 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). 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 graph shows the maximum number of units that a company can produce if it uses all of its resources efficiently. 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. The guns-and-butter curve is the classic economic example of the production possibility curve, which demonstrates the idea of opportunity cost. (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. & R S ¢ £ â è l m ª ¹ ¼ b. show that the opportunity cost of more guns increases, but that of more butter decreases. Analyzing Production Possibilities Key Terms and Concepts. of butter f. … 3. c. increasing opportunity costs between guns … : 8 3 + Product Possibilities Curve Practice . b. that guns are more important than butter. 1. _____ 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. It can produce two goods, apples and bananas. Figure 3-1: Guns and Butter ____ 20. What is the opportunity cost of moving from point A to point B? ECON 500 – Spring 2004. https://www.khanacademy.org/.../v/production-possibilities-frontier When plotting the curve at different allocation points, the representation shows the … <40,000 2. does not apply to guns and butter. Draw a PPC demonstrating what a point on, inside and outside of the curve represents. Ü ¸ Ü ¸ ~# § “ ~# § § � " h B# ÿÿÿÿ ÀÇŠßÎ ÿÿÿÿ � Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). The PPF illustrates a. constant opportunity costs between guns and butter. Figure 2.13 Economic Growth and the Production Possibilities Curve. What is the opportunity cost of moving from point D to point E? b. In this case, one would gain the production of 100 guns but only by giving up the production of 100 pounds of butter. The PPC or production possibility curve/ frontier is a presumptive depiction of the different conceivable combinations of two goods that can be produced within the given available resource. The Production Possibilities Frontier for guns and butter is illustrated below. efficiency. 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. Production Possibilities and the Guns versus Butter Trade-Off Modern economies are highly complex. As we move from ‘E’ to ‘F’ (see Fig. Fortunately, the concepts and principles that guide economists’ (A) is the result of resources not being perfectly adaptable between the production of two goods. Ü Ü Ü Ü Ü ÿÿÿÿ ğ ğ ğ ğ ¬ ğ $ ø ¸ ¸ ¸ ¸ ¸ “ “ “ ~# €# €# €# €# €# €# , ÿ$ ² ±' ¸ ¬# Ü “ “ “ “ “ ¬# § Ü Ü ¸ ¸ Û Á# § § § “ What is the opportunity cost of moving from point A to point B? Guns Butter U D H I . Problem Set #1 ANSWER KEY Economics of International Trade 1. How does the shape of the production possibilities curve reflect the law of increasing opportunity costs? ... if guns and butter are equally valuable, then point G is the best of the 4. 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