Below is a Production Possibilities Table of Consumer Goods (things that consumers buy to satisfy wants) and Capital Goods (things that businesses buy to make them more productive).

Production Combinations Consumer Goods Capital Goods

A 12,000 units 0 units

B 14,000 units 1,000 units

C 12,000 units 2,000 units

D 9,000 units 3,000 units

E 5,000 units 4,000 units

F 0 units 5,000 units

a) Please make a Production Possibilities Curve on a graph (put Consumer Goods on the vertical axis and Capital Goods on the horizontal axis).

b) If we are currently at 2,800 units of Consumer Goods and 200 units of Capital goods, then what would be the current cost to this economy of producing 200 more units of Consumer Goods? Please explain your answer.

c) If we are currently at 2,600 units of Consumer Goods and 200 units of Capital Goods, then what would be the current cost to this economy of producing 200 more units of Consumer Goods? Please explain your answer.

d) Please explain why your answers for (b) and (c) above are different. After all in both questions, we are producing the same 200 additional units of Consumer Goods.

e) If we are currently at 2,800 units of Consumer Goods and 200 units of Capital Goods and if this economy did produce 200 additional units of Consumer Goods to (as was the case in question c above), then would there be any additional long term cost to this economy from this change in the current production combination and if so, what would these cost be?

f) Which of these production combinations listed in the table above is the best one for this economy? Please explain your answer.

Answer rating: 100% (QA)

A 3 Consumer 12000 goods A 160000 15000 14000 d 10000 6 8000 6000 4000 b 10... View the full answer