Suppose a nation has a total of 12 units of labor, which can be used to produce either guns or butter. One gun takes 6 units of labor to produce and 1 butter takes 2 units of labor to produce.

• Explain why scarcity exists in this economy. Use the data as evidence of your reasoning.
• What is the maximum quantity of guns that can be produced?
• What is the maximum quantity of butter than can be produced?
• Draw the nation's production possibility curve.
• What is the opportunity cost of guns in this nation?
• Explain why the nation can't produce both 3 guns and 4 butters.
• Explain why the nation shouldn't produce both 1 gun and 2 butters.