Problem One

Below is a production possibilities table for consumer goods (automobiles) and capital goods (forklifts):

Type of Production	Production Alternatives
	A	B	C	D	E
Automobiles Forklifts	0 30	2 27	4 21	6 12	8 0

1. If the economy is at point C, what is the cost of one more automobile? Of one more forklift? Explain how the production possibilities curve reflects the law of increasing opportunity costs.
2. If the economy characterized by this production possibilities table and curve were producing 3 automobiles and 20 forklifts, what could you conclude about its use of available resources?
3. What would production at a point outside the production possibilities curve indicate? What must occur before the economy can attain such a level of production?

Problem Two

In the year 2022, a small economy known as Luxemburg had a GDP of $4 million mostly contributed by the production of agricultural goods. The price of the market basket of goods was $15. With the increased use of the economy's resources, the GDP of Luxemburg increased to $5 million in the year 2023 whereas the price of a market basket of goods of Luxemburg economy was $35. With the data of the economy given above, it can be concluded that the GDP of Luxemburg had a higher level of production in 2023 than 2022. Explain how you evaluate this statement?