The Table Below Is a Production Possibility Table for the Fictional

question 16

Essay

The table below is a production possibility table for the fictional country of Myopia. Use it to construct the corresponding production possibility curve in the quadrant below. (Label the axes.)
$$\begin{array}{l}\begin{array} { | c | c | } \hline \text { Guns } & \text { Butter } \\\hline 0 & 20 \\\hline 5 & 15 \\\hline 10 & 14 \\\hline 15 & 8 \\\hline 20 & 0 \\\hline\end{array}\\\end{array}$$ (a) Explain the meaning of a production possibilities curve.
(b) What is assumed to be constant when we draw that curve?
(c) How is a point on the curve different from (1) a point inside the curve or (2) a point outside the curve?
(d) How does this curve illustrate the concept of opportunity cost?
(e) How does it illustrate the principle of increasing marginal opportunity cost?

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Definitions:

Market Price

The existing selling or buying price for a service or asset in a particular trading environment.

Economic Profit

The total revenue of a business minus its total costs, including both explicit and implicit costs.

Average Variable Cost

The total variable cost divided by the total output, indicating the variable cost for producing one more unit of a good or service.