Question

2. Problems and Applications Q2 Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter" respectively. The following graph shows the production possibilities frontier for guns and butter. Butter The fact that the production possibilities frontier has a bowed-out shape implies that the opportunity cost of guns produces more butter as the society Indicate which of the points are impossible for the economy to achieve and which are feasible but inefficient. Check all that apply. Characteristic Impossible for the economy to achieve Feasible but inefficient Grade it Now Save & Continue Continue without saving

Answer 1

1. decreases

Opportunity cost of guns decreases as the society produces more butter.

Opportunity cost of guns = 1/slope of PPF

2. Impossible for the economy to achieve - C

The point 'C' is outside the PPF so it will be impossible to achieve by economy.

Feasible but inefficient - D

The point 'D' is below the PPF so it will be feasible but inefficient because economy can produce the more amount of both butter and guns with its resources than point 'D'.