Homework 1
point
Guns
Butter
(tons)
A
0
10
B
200
9
C
400
7
D
600
4
E
800
0
1.!Draw a Production Possibilities Curve that shows the points in the table shown above (put
guns on the vertical axis, butter on the horizontal).
2.!What is the opportunity cost of the first 200 guns produced? Where is the opportunity cost of
guns the highest?
3.!Choose a point F somewhere inside the curve. Is point F efficient, inefficient, or is it impos-
sible to say? Is point F attainable? Explain your answers.
4.!Choose a point G somewhere outside the curve. Is point G efficient, inefficient, or is it im-
possible to say? Is point G attainable? Explain your answers.
5.!Say that mad cow disease destroys half the cattle in this society. How would this affect the
PPC? Draw a hypothetical curve which shows the situation before and after.
6.!Say there is an increase in the population, which means there are more workers available to
either raise livestock or produce guns. How would this affect the PPC? Draw a hypothetical
curve which shows the situation before and after.
7.!Say that there is a new innovation in steel production which means less labor is needed to
make steel. How would this affect the PPC? Draw a hypothetical curve which shows the
situation before and after.
Econ 3!Asatar Bair, abair@ccsf.edu
