Compute production possibilities curve recapable to produces the law of increasing opportunity costs.
Below is a production possibilities table for consumer good (automobiles) and capital goods (forklifts):
|
Production Alternatives
|
|
|
|
|
|
|
Types of Production
|
A
|
B
|
C
|
D
|
E
|
|
Automobiles
|
0
|
2
|
4
|
6
|
8
|
|
Forklifts
|
30
|
27
|
21
|
12
|
0
|
a) Show these data graphically. Upon illustrate what specific assumptions is this production possibilities curve based?
b) If the economy is at point C, illustrate what is the cost of one more automobile? Of one more forklift? Explain how the production possibilities curve reflects the law of increasing opportunity costs.
c) If the economy characterized by this production possibilities table and curve were producing 3 automobiles and 20 forklifts, illustrate what could you conclude about its use of its available resources?
d) Illustrate what would production at a point outside the production possibilities curve indicate? Illustrate what must occur before the economy can attain such a level of production?