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

Production Alternatives

Products

A

B

C

D

E

Food

0

4

8

12

16

Clothing

20

18

14

8

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.The impact of war or a natural disaster on the productive capacity of the nation.

1.A. What is the maximum amount of food this economy can produce?

B. What is the maximum amount of clothing this economy can produce?

the maximum food the economy can produce is 16 units and zero food

2.If the economy is producing at alternative C, what is the cost of one more unit of food?

3.If the economy is producing at alternative C, what is the cost of one more unit of clothing?

4. Suppose the economy is currently producing 4 units of food and 16 units of clothing. Is this economy producing efficiently? Why?

5. Describe how the circular-flow diagram works, including an explanation of the flow of goods and services, resources and money. Explain how the purchase of your textbook works using the model.