QUESTION ONE

Referring to the Table below, Answer questions A to G.

%Resources Devoted To Gun Production

Number Of Guns

%Resources Devoted To Butter Production

Kilograms Of Butter

100

50

0

0

80

40

20

5

60

30

40

10

40

20

60

15

20

10

80

20

0

0

100

25

A.Plot the production possibilities curve for the production of guns and butter. Put guns on the horizontal axis.

B.What is the per unit opportunity cost of increasing the production of guns from 20 to 30? From 40 to 50?

C.What happens to the opportunity cost of producing guns as the production of guns increases?

D.What is the per unit opportunity cost of increasing the production of butter from 10 to 15? From 20 to 30?

E.What happens to the opportunity cost of producing butter as the production of butter increases?

F.Given this production possibilities curve, is producing 26 guns and 13Kg of butter possible?

Is producing 34 guns and 7Kg of butter possible? Is it efficient