Evaluate the production possibilities table and graph for a theoretical economy.PPC Micro Quiz 1-1.pdfDownload PPC Micro Quiz 1-1.pdf

Tractors represent capital goods. Butter represents consumer goods. Answer the following questions related to the production possibilities frontier:

1. In economic terms, what does output or production at any point on the production possibilities frontier represent?
2. In economic terms, what does production of 2 tractors and 9 butter? Where would this point be on the graph?
3. Assume the economy is currently producing at point C, 2 tractors and 15 butter. In terms of the other product, what is the cost of the next unit of tractors? What is the cost of the next unit of butter?
4. Other things equal, which combination of output today would tend to generate better economic growth moving forward, point B on the curve or point D on the curve? Explain.
5. What does any point outside of the current production possibilities curve represent? In economic terms, what needs to happen to achieve a level of output beyond the current production possibilities curve?
6. Assume the production possibilities curve and table represent the economy of Russia. Economic sanctions levied by the United States and Western Europe have idled many economic resources inside of Russia. Using the principles of the production possibilities model, explain the economic effects of these sanctions.

SCHEDULE PRODUCTION POSSIBILITIES Alternative Combination Tractor's (000'S) Butter (millions of lbs) A 0 18 B 1 17 C 2 15 D 3 11 m 4 6 UT 0 A 18 B 15 12 D Butter (millions of lbs) E F X