Problem
Suppose a nation has a total of 24 units of labor, which can be used to produce either guns or butter. One gun takes 6 units of labor to produce and 1 butter takes 2 units of labor to produce.
1) Explain why scarcity exists.
2) What is the maximum quantity of guns that can be produced?
3) What is the maximum quantity of butter than can be produced?
4) Draw the nation's production possibility curve.
5) What is the opportunity cost of guns in this nation?
6) Explain why the nation can't produce both 12 guns and 16 butters.
7) Explain why the nation shouldn't produce both 1 gun and 3 butters.