Question

Imagine a society that produces military goods and consumer goods, which we'll call 'guns' and 'golf...

  1. Imagine a society that produces military goods and consumer goods, which we'll call 'guns' and 'golf clubs'.

Possibility

Guns (000s)

Golf Clubs (000s)

A

0

200

B

40

150

C

70

100

D

90

50

E

100

0

  1. Draw a production possibilities frontier for guns and golf clubs.  
  2. Show a point that is feasible but inefficient.
  3. List a possible reason and explain how that inefficient point may have been reached.
  4. Show a point that is unfeasible for the economy to achieve.  
  5. List a possible reason and explain how that unfeasible point may be possibly reached.

Homework Answers

Answer #1

(i) PPF of guns and golf clubs:

(ii) point X is possible but inefficient as all resources are not made fully use of.

(iii) A possible reason for inefficient production is higher levels of unemployment. When labor is not employed to the optimum, point X is reached. Therefore, output of labor intensive golf clubs falls considerably, while capital intensive guns falls proportionately less than golf clubs.

(iv) A point that is unfeasible for the economy is Y.

(v) Y may be possibly reached by technological advancement. Where an innovation by the R&D of the entrepreneurs enhances productivity and inceases the output of guns and golf clubs.

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