1. Draw the production possibilities frontier for a country that produces only two goods, steel and rice. The curve should be bowed out from the origin.

a)What is the economic explanation of the bowing out of the curve?

b)Show two points on the diagram at which the economy is operating efficiently. What is common about those points, and what is different?

c)Assuming that the economy is always operating efficiently, does the opportunity cost of rice increase, decrease, or stay constant as more rice is produced?

d)How can you represent on the diagram the phenomenon of inefficient or wasteful production?

e)What economic meaning can be given to points that lie beyond the curve?

f)How would the production possibilities frontier shift if the following events occurred?

i)The country's labor force increased.

ii)A new miracle strain of high-yield rice was developed.

iii) An earthquake destroyed many of the country's factories.