Imagine a country that produces only two goods, pork and beans. The following table shows the maximum combinations of pork and beans that can be produced (With full employment of resources, fixed amounts of resources, and fixed technology)
|
Point
|
Pork
|
Beans
|
|
A
|
20
|
0
|
|
B
|
18
|
2
|
|
C
|
14
|
4
|
|
D
|
8
|
6
|
|
E
|
0
|
8
|
a. Draw the production possibilities curve for this country. (Just show the general shape - don't worry about the exact position of each point.)
b. Can this country produce 8 units of pork and 2 units of beans? What is happening in this economy if it is producing this combination?
c. Why can't this country produce 14 units of pork and 6 units of beans? What would have to change for this combination to be possible?
d. What is the cost to this economy of increasing its output of beans from 4 to 6 units?
e. Explain how this table shows increasing opportunity cost.
f. If, instead of pork and beans, this production possibilities table showed good for the present (Middle column) and goods for the future (Right column), which point, B or D, would allow the economy to grow faster? Explain your answer. What are goods for the future?