Production Possibilities Frontier – the line on a production possibilities graph that 3. the slope of a typical production possibilities curve is Analyzing Production Possibilities Key Terms and Concepts. Butter 0 10 12 14 16 Guns 50 40 30 20 0 Draw a production possibilities curve for butter and guns using the data above. What is the opportunity cost of moving from point B to point C? What is the opportunity cost of moving from point B to point C? … a simplified representation of economic forces. : 8 3 + t àÖ0 ÿ ÿ ÿ ÿ ÿ ÿ ö\ö Ö ÿÖ ÿÖ ÿÖ ÿ4Ö 4Ö The graph shows the maximum number of units that a company can produce if it uses all of its resources efficiently. (D) implies that opportunity costs will rise as production levels fall. efficiency. The Production Possibilities Frontier for guns and butter is illustrated below. Explain what would have to be true in each case for the production possibilities curves to be shaped as they are in Graphs I, II and III. ______Production Alternative______ Types of Production A B C D E Butter 0 10 12 14 16 Guns 50 40 30 20 0 Draw a production possibilities curve for butter and guns using the data above. An economy capable of producing two goods, A and B, is initially operating at point M on production possibilities curve OMR in Panel (a). Fortunately, the concepts and principles that guide economists’ https://www.khanacademy.org/.../v/production-possibilities-frontier Upon what specific assumptions is this production possibilities curve based? When plotting the curve at different allocation points, the representation shows the … (B) implies that prices will rise when the costs of making a good rise. 1.6 and Table 1.1), the production of butter rises from 4 units to 5 units, but the number of guns decreases from 11 units to 6 units, i.e. a. You should also be able to identify the opportunity cost of one good in terms of the other as the slope of the PPC. To answer this question first consider how much butter one would have to give up if one went from producing only butter, point A on the PPF curve, to producing only guns, point B on the PPF curve. The only practical points are those somewhat inside the production possibilities curve. The PPC or production possibility curve/ frontier is a presumptive depiction of the different conceivable combinations of two goods that can be produced within the given available resource. KEY QUESTION Below is a production possibilities table for consumer goods (automobiles) and capital goods (forklifts): a. j What is the opportunity cost of moving from point D to point E? Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). The opportunity cost of producing more butter is fewer guns. <40,000 2. In this case, one would gain the production of 100 guns but only by giving up the production of 100 pounds of butter. Draw a production possibilities curve for butter and guns using the data above. Section 3—Production Possibilities Curve. The unit labor requirement in apple production is 3, while in banana production it is 2. a. Graph Home’s production possibility frontier (hint: put apples on the y- axis and bananas on the x-axis). Production Possibilities Curve – a graph that shows alternative ways to use an economy’s resources – does not show consumer satisfaction. Please use your own piece of paper to complete this practice activity. Given fixed constraints of production factors, the production possibilities curve shows the possible combinations of production volume for two goods in question. The PPF illustrates a. constant opportunity costs between guns and butter. Problem Set #1 ANSWER KEY Economics of International Trade 1. What is the opportunity cost of moving from point A to point B? 1 2 3 4 5 t z ™ ş óêßØÍÉÁ¹¯Á¨ÉÍ�Í•��…z…zÍ�ume]Se hTö hBjà 5�>* hTö hBjà >*hTö hBjà 5�hA2 hBjà 6� hBjà 6�hBjà h9Í CJ aJ h9Í CJ aJ hBjà CJ aJ hTö CJ aJ hBjà hBjà CJ aJ hëiÖ hTö hTö hTö 5�>* hTö hTö >*hTö hTö 5�hTö hBjà hTö CJ aJ hÏ"9 hTö hÏ"9 hBjà CJ aJ hTö 5�CJ aJ hëiÖ hTö 5�CJ aJ & R S T ¢ £ m n o { | ~ ÷ ÷ õ õ õ õ ï ï ï ‰ ï ï } } $$If a$gdTö e kd $$If –l Ö ”IÖ ”ÿğ \ Imagine a society that produces military goods (“guns”) and consumer goods (“butter”). The Production Possibilities Frontier for guns and butter is illustrated below. Imagine a society that produces military goods (“guns”) and consumer goods (“butter”). Ü Ü Ü Ü Ü ÿÿÿÿ ğ ğ ğ ğ ¬ ğ $ ø ¸ ¸ ¸ ¸ ¸ “ “ “ ~# €# €# €# €# €# €# , ÿ$ ² ±' ¸ ¬# Ü “ “ “ “ “ ¬# § Ü Ü ¸ ¸ Û Á# § § § “ ... guns v butter. You should choose to not finish development of this product if marginal benefits are less than marginal costs, which will be the case if and only if x. <40,000 2. What is the opportunity cost of moving from point A to point B? When plotting the curve at different allocation points, the representation shows the … t àÖ0 ÿ ÿ ÿ ÿ ÿ ÿ ö\ö Ö ÿ ÿ ÿ ÿ ÿ ÿÖ ÿ ÿ ÿ ÿ ÿ ÿÖ ÿ ÿ ÿ ÿ ÿ ÿÖ ÿ ÿ ÿ ÿ ÿ ÿ4Ö 4Ö How does the shape of the production possibilities curve reflect the law of increasing opportunity costs? If the society increases the production of butter to 300 units, then the most guns that could be produced is 275 units. b. that guns are more important than butter. Answer: Points A and I are not feasible. In the United States economy in 2006, for example, 145.8 million workers combined their labor with $23.1 trillion worth of capital to produce $13.2 trillion worth of goods and services. Draw a PPC demonstrating what a point on, inside and outside of the curve represents. n" j# ×# 0 $ ~" Ä i( § i( B# § Ü B# ( “ “ “ ¬# ¬# § “ “ “ $ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ ÿÿÿÿ i( “ “ “ “ “ “ “ “ “ – ¢ : Product Possibilities Curve Worksheet Name: _____________________________________ Here is the production possibilities table for war goods and civilian goods: ______Production Alternative______ Types of Production A B C D E Automobiles 0 2 4 6 8 Missiles 30 27 21 12 0 Draw a production possibilities curve for automobiles and missiles using the data above. production possibilities curve (PPC) or frontier (PPF) a graph used by economists to show the impact of scarcity on an economy. View 1.3 PPC Wkst.pdf from ECON 2910 at Cedar Ridge H S. Product Possibilities Curve Worksheet Name: _ Here is the production possibilities table for war goods and civilian goods: _Production 1. does not apply to guns and butter. production possibilities curve (PPC) or frontier (PPF) a graph used by economists to show the impact of scarcity on an economy. Here is the production possibilities table for war goods and civilian goods: ______Production Alternative______ Types of Production A B C D E Robots 0 250 450 650 850 Wheat 130 117 109 89 0 Draw a production possibilities curve for robots and wheat using the data above. What is the opportunity cost of moving from point A to point B? Ü ¸ Ü ¸ ~# § “ ~# § § � " h B# ÿÿÿÿ ÀÇŠßÎ ÿÿÿÿ � Explain the difference between a bowed out PPC and a straight line PPC. The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. the guns and vice versa. efficiency. 1.Combination F shows the extreme, where all butter and no guns are produced, while A depicts the opposite extreme, where all resources go into guns. i (C) causes the production possibilities frontier to be a straight line. Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). What is the opportunity cost of moving from point A to point B? Show these data graphically. . The Production Possibilities Frontier for guns and butter is illustrated below. PPF as Transformation Curve In Graph I there are increasing costs. Management uses this graph to decide the ideal ratio of units to produce to minimize cost and waste while maximizing profits. Terms in this set (6) economic model. To see this relationship more clearly, examine Figure 2.3 “The Slope of a Production Possibilities Curve”.Suppose Plant 1 is producing 100 pairs of skis and 50 snowboards per month at point B. (C) causes the production possibilities frontier to be a straight line. of butter) Increasing butter production from 20-25 lbs of butter faces an opportunity cost of 10 guns (2 guns per lb. What is the opportunity cost of moving from point D to point E? (Figure 3-1: Guns and Butter) Points A, B, E, and F: a. indicate combinations of guns and butter that society can produce using all of its factors efficiently. Key Takeaways . ECON 500 – Spring 2004. ... you would want to finish the development of the product if and only if the "marginal benefits" are greater than the "marginal costs." https://www.khanacademy.org/.../v/production-possibilities-frontier You should choose to not finish development of this product if marginal benefits are less than marginal costs, which will be the case if and only if x. Here is the production possibilities table for war goods and civilian goods: ______Production Alternative______ Types of Production A B C D E Tanks 0 10 20 30 40 Bread 75 68 54 47 0 Draw a production possibilities curve for tanks and bread using the data above. Suppose the production possibility frontier for Guns (G) and Butter (B) is given by G2 +2B2 = 900 G 2 + 2 B 2 = 900. (A) is the result of resources not being perfectly adaptable between the production of two goods. It can produce two goods, apples and bananas. a simplified representation of economic forces. What is the opportunity cost of moving from point D to point E? Refer to Exhibit 2-1. This quiz has around twelve questions of the same topic; choose the correct answer. Terms in this set (6) economic model. ... if guns and butter are equally valuable, then point G is the best of the 4. Define a production possibilities frontier (curve). (Figure 3-1: Guns and Butter) Points A, B, E, and F: a. indicate combinations of guns and butter that society can produce using all of its factors efficiently. View 1.3 PPC Wkst.pdf from ECON 2910 at Cedar Ridge H S. Product Possibilities Curve Worksheet Name: _ Here is the production possibilities table for war goods and civilian goods: _Production k Questions you should be able to answer after the lesson. Now consider what would happen if Ms. Ryder decided to produce 1 more snowboard per month. Figure 2.13 Economic Growth and the Production Possibilities Curve. b. show that the opportunity cost of more guns increases, but that of more butter decreases. l aö $If $a$gdTö ~  � ‚ „ … ‡ ˆ Š ó ó ó ó ó ó ó ó $$If a$gdTö Š ‹ Œ • – : 4 4 ( $$If a$gdTö $If Ä kdp $$If –l Ö ”Öˆ ”ÿ\ àdèlğ È „ „ „ „ „ The various combi-nations of goods (i.e., “guns” or “butter”) that can be produced can be plotted as points on a graph and, when these points are connected, the resultant curve is the PPF. Problem Set #1 ANSWER KEY Economics of International Trade 1. In this assignment, you will demonstrate your ability to draw a simple production possibilities curve given data on the quantity of one input (labor) and the amount of labor required to produce each of two outputs (guns and butter). Production Possibilities and the Guns versus Butter Trade-Off Modern economies are highly complex. Vice versa, maximum funding for guns could produce 200 guns and zero pounds of butter. It is a model of a macro economy used to analyze the production decisions in the economy and the problem of scarcity. Possibilities Curve Allocative Efficiency- ... Capital Goods (Guns) Consumer Goods (Butter) Question #4; 34. It can produce two goods, apples and bananas. Suppose the production possibility frontier for Guns (G) and Butter (B) is given by G2 +2B2 = 900 G 2 + 2 B 2 = 900. The assumption is that production of one commodity decreases if that of the other one increases, given the finite resources or inputs available for use. Product Possibilities Curve Worksheet. Exam #1 – Answer Key. What is the opportunity cost of moving from point A to point B? Production possibilities analysis is fundamental to … Answer: If the society is presently producing 200 units of butter, then the most guns the society can produce at the same time is 340 units. l does not apply to guns and butter. Home has 1,200 units of labor available. 2. Analyzing Production Possibilities Key Terms and Concepts. 2) (4 points) Answer a-g, referring to the following chart %resources devoted to gun production Number of guns %resources devoted to butter production Pounds 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. As we move from ‘E’ to ‘F’ (see Fig. What is the opportunity cost of moving from point B to point C? & R S ¢ £ â è l m ª ¹ ¼ Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). The unit labor requirement in apple production is 3, while in banana production it is 2. a. Graph Home’s production possibility frontier (hint: put apples on the y- axis and bananas on the x-axis). Practice: Opportunity cost and the PPC. In Graph I there are increasing costs. Guns Butter U D H I . of butter f. … Home has 1,200 units of labor available. The guns-and-butter curve is the classic economic example of the production possibility curve, which demonstrates the idea of opportunity cost. product_possibilities_curve_practice_worksheet - Product Possibilities Curve Worksheet Name Here is the production possibilities table for war goods and. Plot the production possibilities curve for the production of guns and butter. What is the opportunity cost of moving from point D to point E? ... guns v butter. a. _____ Production Alternative_____ ... 0 10 12 14 16 Guns 50 40 30 20 0 Draw a production possibilities curve for butter and guns using the data above. Production Possibilities Curve-A graph showing alternative ways to use an economy’s productive resources. Decrease in resources decrease production possibilities for both . 45. Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). " " � � � � � ÿÿÿÿ ² ² ² ² Î ü ² ù&. What is the opportunity cost of moving from point B to point C? 5 Key Economic Assumptions. Given this production possibilities curve, the economy could not produce a combination such as shown by point N, which lies outside the curve. of butter) e. Constant at 2 guns per lb. (A) is the result of resources not being perfectly adaptable between the production of two goods. Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). Use slides 3-14 for notes over the production possibilities curve. opportunity cost of the 5 th unit of butter is sacrifice of 5 units of guns. Determine the cost of more butter, if the economy is at point C. What would be the cost of producing more guns? Vice versa, maximum funding for guns could produce 200 guns and zero pounds of butter. Thus, one product’s maximum production possibilities are plotted on the X-axis an… (D) implies that opportunity costs will rise as production levels fall. b. &. (B) implies that prices will rise when the costs of making a good rise. Butter 0 10 12 14 16 Guns 50 40 30 20 0 Draw a production possibilities curve for butter and guns using the data above. On the other hand, if butter is more valuable than guns (as perhaps in peacetime), then point E would be preferred. c. increasing opportunity costs between guns … 1. (Exhibit: Guns and Butter) If the economy were producing 8 units of guns and 12 units of butter per period: this is a possible choice, but would involve unemployment and/or inefficiency. Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C). Figure 3-1: Guns and Butter ____ 20. Product Possibilities Curve Practice . What is the opportunity cost of moving from point A to point B? b. show that the opportunity cost of more guns increases, but that of more butter decreases. 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