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Given the production possibilities table for consumer goods and capital goods, graph the production possibilities curve, explaining the law of increasing opportunity costs.

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Below is a production possibilities table for consumer good (automobiles) and capital goods (forklifts):

                                     Production Alternatives                                           

 

 

 

 

 

Types of Production 

A

B

C

D

E

Automobiles 

0

2

4

6

8

Forklifts

30

27

21

12

0

 

a. Show these data graphically. Upon what specific assumptions is this production possibilities curve based?

b. If the economy is at point C, what is the cost of one more automobile? Of one more forklift? Explain how the production   possibilities curve reflects the law of increasing opportunity costs.

c. If the economy characterized by this production possibilities table and curve were producing 3 automobiles and 20 forklifts, what could you conclude about its use of its available resources?

d.What would production at a point outside the production possibilities curve indicate? What must occur before the economy can attain such a level of production?

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