Use the PPC for Macro Island above to answer the following questions. This question has multiple parts. Make sure that you have answered all parts to maximize your points earned.
Explain in one to two sentences what the PPC is illustrating for Macro Island. Answers must include specific information from the graph. (2 points)
Explain what a move from point B to point A would mean in terms of opportunity cost and production. Answers must include specific information and quantities from the graph. (3 points)
Explain the difference between what points C and D represent on the PPC for Macro Island. Answers must include specific information from the graph. (2 points)
REMINDER - Absolutely no outside resources are allowed to be used on tests. This includes but is not limited to the use of lessons, notes, internet resources, and artificial intelligence. To do so is a violation of the honor code and will be reported.
(7 points)
The PPC for Macro Island illustrates the different combinations of two goods (guns and butter) that the island can produce given its resources and technology. The graph shows a tradeoff between the production of guns and butter, as illustrated by the negative slope of the curve.
A move from point B to point A would mean that Macro Island is producing less guns (from 20 to 10) and more butter (from 60 to 70). This indicates that the island is reallocating resources and shifting its production towards butter. In terms of opportunity cost, Macro Island would be giving up the production of 10 guns to produce an additional 10 units of butter.
Points C and D on the PPC represent different levels of efficiency or the maximum potential output that Macro Island can achieve. Point C represents a situation where the island is producing at full capacity for both guns (30) and butter (80). Point D, on the other hand, represents a situation where the island is not utilizing its resources efficiently and is producing below its maximum potential, with only 15 guns and 40 units of butter.