Suppose that a nation's production possibilities can be represented by the table below:

Production Alternatives

Products

A

B

C

D

E

Computers

0

6

10

14

18

Cell phones

22

20

16

10

0

Draw and label the production possibilities graph.

Show the following on your graph:

a.Productive inefficiency

b.Full employment of all of the resources

c.Area where production is impossible

d.An increase in the productive capacity of computers with no change in the capacity to produce cell phones.

1.What is the maximum number of computers this economy can produce? How many cell phones can it produce at this point?

2.If the economy is producing at alternative B, what is the cost of one more computer?

3.If the economy is producing at alternative B, what is the cost of one more cell phone?

4.Is this economy subject to the law of increasing opportunity costs? How can you tell?

5. Suppose the economy is currently producing 14 computers and 6 cell phones. Is this economy producing efficiently? Why?