1. Given the table above and assume that guns are represented on the Y axis and
ID: 1137057 • Letter: 1
Question
1.
Given the table above and assume that guns are represented on the Y axis and butter on the X axis. Which of the following question is true.
The opportunity cost is constant at 1 Butter for every 10 guns.
The opportunity cost of increasing butter from 4 units to 5 units is 5 units of guns.
The opportunity cost of increasing butter from 4 units to 5 units is 50 units of guns.
This PPF is a straight line constant cost model.
2.
Given the table above and assume that guns are represented on the Y axis and butter on the X axis. Which of the following question is true.
The opportunity cost of moving from 2 butter to 3 butter is 15 units of guns.
The opportunity cost of increasing butter from 4 units to 5 units is 5 units of guns.
This PPF is a straight line constant cost model.
The opportunity cost is constant at 1 Butter for every 10 guns.
3.
Given the table above and assume that guns are represented on the Y axis and butter on the X axis. Which of the following question is true.
The opportunity cost is constant at 1 Butter for every 10 guns.
Increasing gun production has no opportunity cost.
This PPF is a straight line constant cost model.
This model is a bowed PPF representing the law of increasing cost.
Butter Guns 0 100 1 98 2 90 3 75 4 50 5 0Explanation / Answer
(1) Option (3)
Opportunity cost of butter = Change in quantity of guns / Change in quantity of butter = (50 - 0) / (5 - 4)
= 50/1 = 50
(2) Option (1)
Opportunity cost of butter = Change in quantity of guns / Change in quantity of butter = (90 - 75)/(3 - 2)
= 15/1 = 15
(3) Option (4)
As more units of butter are produced, units of guns to be given up is increasing, reflecting increasing opportunity cost and a bowed-out PPF.
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