4. The graph below displays a production possibilities curve for Economica, a country that is choosing between allocating resources to transportation or beer. Study the diagram carefully and answer the questions that follow. Transportation F'PC for the US 0 50 75 100 Beer Calculate the opportunity cost of 1 unit of beer as you move from point D to point C, from point C to point B and from point B to point A? Show your calculations. (4 points) Use your answer to part 'a' to explain what happens to the opportunity cost of beer as beer production is increased. (2 points) Choose the best answer to complete the following sentence: The reason for the curved shape of the PPF is that.... (1 point) (i) Resources are scarce (ii) Increasing beer production causes a decrease in transportation production (iii) There are opportunity costs for producing more of either good (iv) Some inputs are better at producing beer than transportation (v) None of the above Show what would happen to the PPF if a new strain of wheat (used in the production of beer) is developed that is drought-resistant. Explain briefly. (2 points) The President of Economica recently proposed that the country should reduce its expenditure on construction, maintenance and repair of transportation infrastructure. Given the assumptions of the PPF model, explain the immediate short-term effect of doing so (explain in writing, and illustrate your answer by referring to the PPF). (2 points) Economic data indicate that spending on transportation infrastructure by the government improves productivity of workers and businesses. Using the PPF model, analyze what a reduction in transportation spending will do in the long-run to the country's economy (explain in writing and illustrate your answer by referring to the PPF). (2 points)