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Country Leagsville can only produce Steel and Food with the given amount of resources and technology. The Production Possibilities are given below: Combination Steel (Tonnes)

Country Leagsville can only produce Steel and Food with the given amount of resources and technology. The Production Possibilities are given below:

Combination

Steel (Tonnes)

Food (Tonnes)

A

0

100

B

25

90

C

50

70

D

75

40

E

100

0

  1. Draw the Production Possibilities Curve?
  2. Calculate the Opportunity Cost of moving from Combination C to D
  3. How does this illustrate Increasing Opportunity Cost?

Suppose the 'Economic Growth' allows us to produce more goods, so that the new production possibilities for Steel and Food are as follows:

Combination

Steel (Tonnes)

Food (Tonnes)

A

0

100

B

25

90

C

50

70

D

75

60

E

100

40

F

125

0

  1. Draw the new Production Possibilities Curve, and describe how the New Curve is related to the Old curve.

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