22) Complete the following sentence. In Figure 2.1, A) point b is superior to point a. B) movement from c to b would require a technological improvement. C) the concept of decreasing opportunity cost is illustrated. D) movement from a to b would require a technological improvement. E) some resources must be unemployed at point c.
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Use the following production possibilities table for war goods and civilian goods to answer questions a to e.
|
|
Production alternatives |
||||
|
Type of product |
A |
B |
C |
D |
E |
|
Cars (in millions) |
0 |
2 |
4 |
6 |
8 |
|
Guided missiles (in thousands) |
30 |
27 |
21 |
12 |
0 |
a. Graph the data in the table. Are there constant or increasing opportunity costs for the production of missiles?
b. If the economy is currently at point C:
- What is the cost of one million more cars?
- What is the cost of one thousand more guided missiles?
c. Label a point G inside the curve of the graph. What does it indicate?
d. Label a point H that lies outside the PPF curve.
- What does this point indicate?
- What must occur before the economy can attain the level of production indicated by point H?
e. Suppose improvement occurs in the technology of producing guided missiles but not in the production of cars.
- Draw the new PPF curve on the graph you created.
- Now draw a curve that reflects technological improvement in the production of both products.
