Worksheet on PPC

Question 1. Table shows different combination of butter and guns produced in an economy with the
given resources.

______Production Alternative______

Types of Production A B C D E

Butter 0 10 12 14 16

Guns 50 40 30 20 0

a. Draw a production possibilities curve for butter and guns using the data above.
[5]
b. Label the points where the economy would be efficient (X), underutilized (Y) and
unattainable (Z). [3]
c. What is the opportunity cost of moving from point A to point B? [2]
_______________________
d. What is the opportunity cost of moving from point B to point C? [2]
______________________

e. What is the opportunity cost of moving from point D to point E? [2]

_____________________

Question 2.

Use the PPF below to answer the following questions. [ Each question carries 2 Marks]

NOTE: THAT CURVE “BB” IS THE CURRENT FRONTIER FOR THIS ECONOMY.
i). Suppose massive new sources of oil and coal are found within the economy and there are major
technological innovations in both sectors of the economy. Which curve in the diagram would
represent the new production possibility curve? (Indicate the curve you choose with two letters.)
__________

ii). Suppose there is a major technological breakthrough in ONLY the consumer goods industry, and
the new technology is widely adopted. Which curve in the diagram would represent the new
production possibilities curve? (Indicate the curve you choose with two letters.) _________

iii). If BB’ represents a country’s current production possibilities frontier, what can you say about a
point like x? (Write a brief statement.) If BB’ represents a country’s current production possibility
frontier, what can you say about a point like y? (Write a brief statement.)