5/7 Application #4 Production Possibilities Curve

1. Create a production possibilities curve for guns and butter. Label your X and Y axes from 0-100. Your PPC should stretch from 100 guns to 100 lbs of butter.

2. Current production is at about 50/50 guns and butter. Label that point A.

3. The war in Afghanistan ends and so the US switches 10% of it’s production of guns to butter. Graph the change and label it B.

4. What is the marginal cost of this change?

5. The US conquers Mexico, doubling our resources and labor force. Illustrate that change and label it C.