1) Assume that with employment and no changes in resources ortechnology, and economy can produce the following combination ofcapital goods (those, such as machinery, that are used to produceother goods) and consumer goods (those, such as food that directlysatisfied a consumer).
Capital goods (thousands of units) Consumer goods (thousands ofunits)
100 0
90 25
70 50
40 75
0 100
a) Plot the above combinations and connect the points.
b) What would be the effect of operating at point a or b?
c) At which point on this curve should this economy produce?Why?
d) Plot a point labeled U to indicate that the economy is expiringsome unemployment. Plot another point labeled U1 to indicate moreserious unemployment than at point U.
e) Show graphically the effect on the production possibility curveof economic growth arising from new technology that influences theproduction of both capital goods and consumer goods.
f) Illustrate by a dashed line the effect of technological advancesthat improve the production of capital goods, but not consumergoods.
g) The opportunity cost of increasing production consumer goodsfrom 25 thousands units to 75 thousands units ___________; theopportunity cost of increasing the production of consumer goodsfrom 75 thousands units to 100 thousands units is ________; theopportunity cost of increasing the production of capital goods from0-40 thousands units is ________; and the opportunity cost ofincreasing the production of capital goods from 40 thousands tounits to 100 thousand is ___________.
1) Assume that with employment and no changes in resources ortechnology, and economy can produce the following combination ofcapital goods (those, such as machinery, that are used to produceother goods) and consumer goods (those, such as food that directlysatisfied a consumer).
Capital goods (thousands of units) Consumer goods (thousands ofunits)
100 0
90 25
70 50
40 75
0 100
a) Plot the above combinations and connect the points.
b) What would be the effect of operating at point a or b?
c) At which point on this curve should this economy produce?Why?
d) Plot a point labeled U to indicate that the economy is expiringsome unemployment. Plot another point labeled U1 to indicate moreserious unemployment than at point U.
e) Show graphically the effect on the production possibility curveof economic growth arising from new technology that influences theproduction of both capital goods and consumer goods.
f) Illustrate by a dashed line the effect of technological advancesthat improve the production of capital goods, but not consumergoods.
g) The opportunity cost of increasing production consumer goodsfrom 25 thousands units to 75 thousands units ___________; theopportunity cost of increasing the production of consumer goodsfrom 75 thousands units to 100 thousands units is ________; theopportunity cost of increasing the production of capital goods from0-40 thousands units is ________; and the opportunity cost ofincreasing the production of capital goods from 40 thousands tounits to 100 thousand is ___________.
