What is the opportunity cost of the 3rd tank What does produ

What is the opportunity cost of the 3^rd tank? What does production at point M mean? What does producing at point N mean? What would happen If there is a significant technological advancement in production of tanks? Illustrate Could we produce more trucks? Explain How would you show economic growth and expansion? Show the Impact of a devastating war.

Solution

1. The opportunity cost of producing the 3rd tank is giving up 3 trucks.
2. The production at point M is not possible because it is beyond the production possibility frontier.
3. Producing at point N means that the economy is not working at its full potential.

4. Technological advancement in the production of tanks would displace workers from this sector and more workers will be hired in the production of trucks if its demand goes up.

5. Economic growth is the increase in the inflation-adjusted market value of goods and services produced by an economy over a period of time. Whereas an economic expansion is increase in the level of economic activity and of the goods and services available.

6. Impact of devastating war: Hyper-inflation

Prices get out of control, money becomes so worthless that it would be cheaper to burn the notes than be used to buy firewood.

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