La Pintura, Escultura, Cine, Musica

Figure shows a production possibilities frontier between guns and butter. It is bowed out because the

opportunity cost of butter depends on how much butter and how many guns the economy is producing. When the

economy is producing a lot of butter, workers and machines best suited to making guns are being used to make

butter, so each unit of guns given up yields a small increase in the production of butter. Thus, the frontier is steep

and the opportunity cost of producing butter is high. When the economy is producing a lot of guns, workers and

machines best suited to making butter are being used to make guns, so each unit of guns given up yields a large

increase in the production of butter. Thus, the frontier is very flat and the opportunity cost of producing butter is

low.

b. Point A is impossible for the economy to achieve; it is outside

the production possibilities frontier. Point B is feasible but inefficient because it is

inside the production possibilities frontier.

c. The Hawks might choose a point like H, with many guns and not

much butter. The Doves might choose a point like D, with a lot of butter and few

guns.

d. If both Hawks and Doves reduced their desired quantity of guns

by the same amount, the Hawks would get a bigger peace dividend because the

production possibilities frontier is much flatter at point H than at point D. As a

result, the reduction of a given number of guns, starting at point H, leads to a much larger increase in the quantity

of butter produced than when starting at point D.

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