1. Production Possibilities. When drawing graphs, make sure to label all axes and curves

If you get decimals in your answers, round to two decimal places. Country X is faced with the following output combinations for capital goods and consumer goods. Option Capital Goods Consumer Goods A 0 400,000 B 25,000 380,000 C 50,000 350,000 D 75,000 200,000 E 100,000 0

Complete parts a, b, c, d, e, f, g, h, and i. a. Graph the production possibilities curve for Country X with capital goods on the x-axis and consumer goods on the y-axis. b. What is the numerical value for the y-intercept in this example? c. How is opportunity cost represented on the graph? d. Solve for the slope between Options A and B, Options B and C, Options C and D, and Options D and E. e. Does the Law of Increasing Opportunity Costs hold for this example? Explain why or why not. f. As you move from point C to point D, what is the cost of one more consumer good? g. As you move from point C to point D, what is the cost of one more capital good? h. If Country X wanted to experience higher levels of economic growth over the next few years, would they be better off choosing option B (a combination of 25,000 capital goods and 380,000 consumer goods) or option D (a combination of 75,000 capital goods and 200,000 consumer goods)? Explain. i. Based upon your response to part h, what is the marginal or opportunity cost of this decision in terms of economic growth and profits? In other words, if you chose Option B in part h, will this nation be sacrificing current or future profits? If you chose Option D in part h, will this nation be sacrificing current or future profits?

Complete either parts j and k together OR parts l and m together. Completing all four parts will not result in any extra credit. If you do answer all four parts, and there is an error in one or more parts, those will be the parts that count towards your grade. j. On your graph, show a point that represents a point of inefficiency occurring in the economy. Label this point I. k. Suppose there is a technological advancement only in capital good production with no change in consumer good technology. Show how this would affect your graph and label this change as T.

l. On your graph, show a point that represents a point of unattainability in the economy. Label this point U. m. What would have to change in this economy in order to reach this unattainable point?.