Product Possibilities Curve Worksheet 1. 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...

Product Possibilities Curve Worksheet
Product Possibilities Curve Worksheet
1. 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
a. Draw a product possibilities curve for automobiles and missiles using the data above.
Please see below the production possibility frontier for Automobiles and Missiles. The five production alternatives are marked on the graph below as well.
b. If the economy is at point C, what is the cost of one more automobile? One more missile? Explain how the production possibilities curve reflects the law of increasing opportunity costs.
If the economy is at point C i.e. producing 4 units of automobiles and 21 units of missiles, and it wants to produce one more unit of automobile then it will have to reduce the production of missiles. The cost of producing one extra automobile is the production of missiles forgone in exchange (i.e. the slope of the curve).
In this case, we can see from the graph that if we want to increase the production of automobile by two units from 4 to 6, then the production of missiles reduces by 9 units (from 21 to 12).. Hence, if we want to increase the production of automobiles by one unit, then the production of missiles should reduces by 4.5 units (9 divided by 2) which in this case is the cost of producing one more automobile.
Similarly, if we move from the current...