Suppose that a government face
Suppose that a government faces a choice among various levels ofdefense, represented by the production of missiles, and of food,represented by the production of corn. The following figuresindicate the various combinations of missiles and corn that thecountry can produce:
Possibility Missiles (# per year) Corn (millions of bushels peryear)
A 0 11
B 2 10
C 4 8
D 6 6
E 8 3
F 10 0
a. Can this country produce more than 12 million bushels of cornper year? Can it produce more than 10 million bushels per year? Canit produce more than 11 missiles per year? Can it produce more than9 missiles per year?
b. Suppose the government of this country decides that, in theinterest of national security, it must produce 4 missiles per year.What is the number of bushels of corn it can produce?
c. Measured in terms of corn, what is the cost of producing 4missiles per year rather than 2 missiles per year?
d. Suppose that this country develops and obtains new technologyto produce 50% more corn at each level of missile production shownin the table above. Will the new production possibilities curve becloser to, or farther from the origin than the one graphed in parta?
e. Under the conditions described in part d, what is the cost ofproducing 4 missiles per year rather than 2 missiles per year?
Answer:
(a) The maximum amount of missile that can be produced is 10 andthe maximum amount of corn that can be produced is 11 millionbushels. Thus, it can produce more than 10 million but not producemore than 12 million bushels of corn. It can produce more than 9but can not produce more than 11 missiles.
(b) If it wants to produce 4 missiles, then the corn that can beproduced is 8 million bushels
(c) in terms of corn, what is the cost of producing 4 missilesper year rather than 2 missiles is the amount of corn productionthat is lost = 10 -8 = 2million bushels of corn
(d) If the country develops and obtains new technology toproduce 50% more corn at each level of missile production, then theproduction possibilities will expand and the curve will moveoutward, farther away from the origin.
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