The production of any goods or services requires the allocation of resources that otherwise could be used to produce other goods and services, given the available technology. Additional units can be provided only by incurring an opportunity cost.
Tasks:
The production possibilities table given below illustrates the choices of country A in producing guns and butter, assuming efficient resource allocation. Using the data provided in the table, complete the following tasks:
| Guns |
Butter |
| 25 |
0 |
| 24 |
6 |
| 22 |
11 |
| 18 |
15 |
| 13 |
18 |
| 7 |
20 |
| 0 |
21 |
Plot the country's production possibilities curve.
Calculate the opportunity cost of producing guns and butter at each point in the production possibilities curve.
Does the Production Possibilities Curve (PPC) illustrate increasing, constant, or decreasing opportunity cost? Why?