Use the following to answer questions :
Figure: Guns and Butter
-(Figure: Guns and Butter) Look at the figure Guns and Butter. This production possibility frontier is:
A)bowed out because of increasing opportunity costs.
B)bowed in because of increasing opportunity costs.
C)bowed in because of constant costs of guns and butter.
D)linear because of constant costs.

Question

Use the following to answer questions :
Figure: Guns and Butter 
-(Figure: Guns and Butter) Look at the figure Guns and Butter. This production possibility frontier is:
A)bowed out because of increasing opportunity costs. 
B)bowed in because of increasing opportunity costs. 
C)bowed in because of constant costs of guns and butter. 
D)linear because of constant costs.

Quizplus · Accepted Answer

The production possibility frontier in the figure is bowed out, which indicates increasing opportunity costs. This means that in order to produce more of one good, the opportunity cost of producing the other good increases. Therefore, the best choice(s) would be a combination of guns and butter that falls on the production possibility frontier, such as point B or point C, which represent efficient use of resources. Any combination of guns and butter outside of the production possibility frontier would be inefficient and unattainable given the current resources and technology.

Use the Following to Answer Questions