1.

a. compute the opportunity cost in forgone consumer goods (millions of pounds of butter) for each additional unit of military output produced (number of planes):

Military output: 0 1 2 3 4 5

Consumer goods output: 100 95 80 60 35 0

Opportunity Cost:

b. As military output increases, are opportunity cost increasing, decreasing, or remaining constant?

2.

According to the figure below

a. At which point(s) is this society producing some of each type of output but producing inefficiently?

b. At which point(s) is this society producing the most output possible with the available resources and technology?

c. At which point(s) is the output combination unattainable with available resources and technology?

d. Show the change that would occur if the resources of this society increased. Label this curve PPC.

e. Show the change that would occur with a huge natural disaster that destroyed one third of production capacity. Label this curve PPC3

10 OUTPUT OF TRUCKS Piron C 2 1 5 6 7 8 10 OUTPUT OF TANKS Der dayPRODUCTION POSSIBILITIES CURVE A C D ALL OTHER GOODS (units per year) G F H PPC HOUSING junits per year