Description
1- Word format only
2- All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).
3- No matching ratio
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
Hello, let me know if you may need anything added or removedThanks
QUESTION 1
Production Possibilities Frontier
Quantity of guns produced
30
H
25
A
20
B
D
15
10
5
0
0
1
2
3
4
5
6
7
Quantity of butter produced
a) The figure above represents a production possibility frontier of guns against butter. When
this economy is producing a lot of guns, the labourers and the machinery that could be
used to make guns are used to make butter; thus, each unit of butter given up yields a
smaller increase in the production of firearms. That's why the graph of guns against butter
is bowed out the opportunity cost of guns depends on how much firearms and how much
butter are produced in the economy.
b) It is difficult for the economy to accomplish point A; it is beyond the frontier of
production possibilities. Point B is feasible yet inefficient because it is beyond the
frontier of production possibilities.
c) Point H could be chosen by the Hawks, with many guns and not much butter. The Doves,
with a lot of butter and a few firearms, could choose point D
d) Suppose both Hawks and Doves decreased their desired amount of guns by the same
amount. In that case, the Hawks will obtain a greater peace dividend because at point H
the boundary of production possibilities is much flatter than at point D. As a
consequence, the decrease in the number of guns made, beginning at point H, contributes
to a much greater increase in the amount of butter produced than at point D.
QUESTION 2.
a) Opportunity cost of producing a car is 15 bushels of wheat. It means if Canada wants to
produce a car, it needs to give up 15 bushels of wheat. Also opportunity cost of producing
a bushel of wheat is 1/15 of cars, which means if Canada wants to produce a bushel of
wheat it need to give up 1/15 of cars
production possibilities frontier
Cars( Per million years)
25
20
canada's ppf
15
10
A
5
0
0
50
100
150
200
wheat( per million years)
250
300
350
b) If each of the 10 million employees produces two cars, a total of 20 million cars are
made, which is the vertical intercept on the frontier of production possibilities. If all 10
million employees produce 30 bushels of wheat each, a total of 300 million bushels will
be made, which is the horizontal intercept on the frontier of production possibilities.
Since the tradeoff between cars and wheat is always the same, the production possibilities
frontier is a straight line.
c) If Canada approves the offer, 200 million bushels of whea...