Question

A country needs to decide if it will defend itself ("guns") or feed its population ("butter"). Look at the graph. Under what conditions might a country choose Point B over Point D?
A. If the country is at war, it would make sense to favor food production, with an opportunity cost of decreasing defense dramatically. 
B. If the country is at war, it would make sense to favor guns, with an opportunity cost of decreasing food production dramatically. 
C. If the country is in a famine, it would make sense to favor food production, with an opportunity cost of decreasing defense dramatically. 
D. If the country is in a famine, it would make sense to favor guns, with an opportunity cost of decreasing food production dramatically.

Answer 1

The answer would be B. Answers A and D make no sense and are very illogical, so they can be eliminated immediately. Since point B is favoring gun production and declining food, or butter production, B is the only sensible answer.

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Answer 2

Answer:

B. If the country is at war, it would make sense to favor guns, with an opportunity cost of decreasing food production dramatically.

Explanation:

The graph shows the possibilities boundary curve, which consists of the various possible combinations of production of the two goods along each point of the curve. For example, point B produces more food and fewer weapons, and point D produces the opposite - more firearms and less food. Opportunity cost is the amount of one of the goods that must be sacrificed if it is decided to produce more of the other good.

For example, if the country produces at point B, a combination is produced, suppose it is 100 food and 50 guns. When the government shifts production to point D, that combination changes, for example to 80 guns and 40 foods. Thus, the opportunity cost of producing 30 extra guns is to stop producing 60 foods.  This would only make sense if the country was in a war and if in a hypothetical situation, the opportunity cost of producing guns instead of food was decreasing.

The opportunity cost would be decreasing only if each point along the curve between points B and D has a lower opportunity cost than the previous point. This would come to the point where decreasing food production in exchange for guns production would not be so expensive, meaning it would not have a high opportunity cost. Otherwise, increased guns production would be a sacrifice for the population, which could be without food, as no C-point that increases guns production drastically reduces food production. At this point, the opportunity cost of producing more guns is extremely high and is not nearly food shortage.