5A. Use the data below and GRAPH PAPER, draw the Production Possibilities Curve for a hypothetical economic system. Y axis = butter; x axis = guns.

You must include the completed graph in your answer pages.

QUESTION 5B. Why? The answer to 5B is place on the graph from 5A. If you include 2 graphs, you will be penalized.

POINT	BUTTER	GUNS
A	0	50
B	10	40
C	12	30
D	14	20
E	16	0

5B. On the graph you created in 5A, sketch or draw a new PPC that represents a negative change in the number of skilled workers available for hire in this hypothetical economy.Use a dashed - - - - - - - line and label it PPC 2.

5C. To the amount of "butter" produced from 10 units to 12 units, how many units of "guns" must be sacrificed? ______

5D. To the number of "guns" produced from 20 to 30, how many units of "butter" must be sacrificed? ______

5E. What is the best point for this economic system?

1. Somewhere in the middle, so you produce some capital goods and some consumer goods.
2. A point inside the original PPC, because the economic system is saving scarce resources.
3. It is indeterminate, because we do not have enough information to make an informed marginal benefit versus marginal cost decision.
4. It really does not matter, because there is no such thing as "the basic economic problem."

5F. Which of the following is the best definition of the "the law of increasing opportunity cost?"A.As an economy produces more of one good, more of the other good can also be produced.

1. As an economy produces less of one good, more of the other good can be produced.
2. As an economy produces more of one good, the economy is stuck with the same amount of the other good.
3. As an economy produces less of one good, it will produce less of the other good.

5G. What is meant by "factor suitability?"

1. All economic resources can be used in the same way, for example, all labour resources are interchangeable.
2. Not all economic resources can be used interchangeably, which explains the law of increasing opportunity cost.
3. Not all economic resources can be used interchangeably, which explains why opportunity cost decreases when increasing production of one good versus a second good.
4. D.None of the above.