Here are the solutions for the production possibilities review/exercise
1. The graph you draw for this one will be a bowed-out (concave from the origin) line resembling that shown on problem 5.
    On the vertical (side) axis it will intersect at 60, on the horizontal (bottom) axis it will intersect at 45.

2. Similar to last, but vertical intersection at 40, horizontal intersection at 50.

3. Any bowed-out curve (as above).

4. This graph will have any downsloping straight line.  The straight line involves constant trade off of one item for the other (such as down 2, over 1 -- meaning you give up two "other" for 1 unit of good x).  The law of increasing opportunity cost is not in effect here.  Note that we almost always draw pp curves so as to include increasing opportunity costs (in other words, bowed out).

5.and 6.  These are really the same answers. More or better resources or improved technology will allow more to be produced.  We show this as a movement (shift) outward of the original curve.  The new curve will at all points lie outside of the original one, showing greater amounts of "other" and good x.
 

Supplementary problem:  (going back to the graph on #6, as originally shown) Where would we plot a combination which represented inefficient production?
(answer: inside -- in other words southwest of -- the curve)

Where would we plot an impossible combination, meaning more of both than can currently be produced?
(answer: outside)

Where would we plot a combination representing efficient production?
(answer: anywhere on the line would be productively efficient or sometimes called technically efficient.  Note: FYI we don't have enough information to know which point is "allocatively" efficient.)
 
 
 

Hosted by www.Geocities.ws

1