1) The production possibilities table below shows the hypothetical relationship between the production of guns and butter in an economy for which there is a fixed CELL.

Combination Guns Butter

A 0 25

B 1 24

C 2 22

D 3 18

E 4 13

F 5 0

A.) Graph a production possibilities curve based on the data on graph paper. Make sure your graph is 4" x 7" or larger. Pay attention to the scales on the two axes; your graph should be a curve. If you draw it as a straight line, you will earn no credit.

b.) What is the marginal opportunity cost in butter of increasing the production of guns from 0 to 1 unit? It is the loss of __________ unit(s) of butter.

c.) What is the marginal opportunity cost in butter of increasing the production of guns from 1 to 2 units? It is the loss of __________ unit(s) of butter.

d.) What is the marginal opportunity cost in butter of increasing the production of guns from 2 to 3 units? It is the loss of __________ unit(s) of butter.

e.) What is the marginal opportunity cost in butter of increasing the production of guns from 3 to 4 units? It is the loss of __________ unit(s) of butter.

f.) What is the marginal opportunity cost in butter of increasing the production of guns from 4 to 5 units? It is the loss of __________ unit(s) of butter.

g.) Explain how the production possibilities curve reflects the law of increasing (marginal) opportunity costs. Use your answers to b,c,d, e & f as part of the explanation. Give a complete answer.

h.) Say the economy is producing 2 guns and 19 butter. Mark this point on your graph and label it "H". How would you describe the situation shown by point "H"? Give a complete answer.

i.) Now, say the economy plans to produce 2 guns and 25 butter; mark this point on your graph and label it

"I." How would you describe the situation shown by point "I"? Give a complete answer.

j.) What must occur before the economy can produce at point "I"? Give a complete answer.