Consider a hypotheticaleconomy which produces only two different kinds of standardized goods: consumption goods and capital goods.The following table describes 5 points on the production possibilities curve for this economy:

Point:

A

B

C

D

E

Capital Goods:

0

10

20

30

40

Consumption:

100

90

70

40

0

(a) Use Microsoft Excel to graph the production possibility curve (or frontier), assuming that it consists of straight line-segments connecting points A, B, C, D, and E. As you set up your diagram make sure that you put capital on the horizontal axis and consumption on the vertical axis.

(b) Calculate the opportunity cost of one additional unit of capital, in terms of fewer units of the consumption good at the points A, B, C, and D on the above production possibilities frontier (make sure that you show all your calculations and include them with your answer).

You should submit your solution, including the diagram you created in Excel, as a single Word document (in other words, you need to cut and paste from Excel into Word and then save and upload the resulting document) to Canvas.