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1、ProblemsandApplications1.Manyanswersarepossible.2.a.Steelisafairlyuniformcommodity,thoughsomefirmsproducesteelofinferiorquality.b.Novelsareeachunique,sotheyarequitedistinguishable.c.Wheatproducedbyonefarmeriscompletelyindistinguishablefromwheatproducedbyanother.d.Fastfoodismoredistinguishab
2、lethansteelorwheat,butcertainlynotasmuchasnovels.3.SeeFigure2-5;thefourtransactionsareshown.Figure2-54.a.Figure2-6showsaproductionpossibilitiesfrontierbetweengunsandbutter.Itisbowedoutbecausewhenmostoftheeconomy’sresourcesarebeingusedtoproducebutter,thefrontierissteepandwhenmostoftheeconomy
3、’sresourcesarebeingusedtoproduceguns,thefrontierisveryflat.Whentheeconomyisproducingalotofguns,workersandmachinesbestsuitedtomakingbutterarebeingusedtomakeguns,soeachunitofgunsgivenupyieldsalargeincreaseintheproductionofbutter;thustheproductionpossibilitiesfrontierisflat.Whentheeconomyispro
4、ducingalotofbutter,workersandmachinesbestsuitedtomakinggunsarebeingusedtomakebutter,soeachunitofgunsgivenupyieldsasmallincreaseintheproductionofbutter;thustheproductionpossibilitiesfrontierissteep.b.PointAisimpossiblefortheeconomytoachieve;itisoutsidetheproductionpossibilitiesfrontier.Point
5、Bisfeasiblebutinefficientbecauseit’sinsidetheproductionpossibilitiesfrontier.Figure2-6c.TheHawksmightchooseapointlikeH,withmanygunsandnotmuchbutter.TheDovesmightchooseapointlikeD,withalotofbutterandfewguns.d.IfbothHawksandDovesreducedtheirdesiredquantityofgunsbythesameamount,theHawkswouldge
6、tabiggerpeacedividendbecausetheproductionpossibilitiesfrontierismuchsteeperatpointHthanatpointD.Asaresult,thereductionofagivennumberofguns,startingatpointH,leadstoamuchlargerincreaseinthequantityofbutterproducedthanwhenstartingatpointD.5.SeeFigure2-7.Theshapeandpositionofthefrontierdependon
7、howcostlyitistomaintainacleanenvironment¾theproductivityoftheenvironmentalindustry.Gainsinenvironmentalproductivity,suchasthedevelopmentofano-emissionautoengine,leadtoshiftsoftheproduction-possibilitiesfrontier,liketheshiftfromPPF1toPPF2showninthefigure.
