Answer
a) The production possibilities frontier has a bowed-out shape since the economy in question may choose to produce more of a second good (at the expense of producing fewer of the first good). The economy has to decide if making the second good is worth the opportunity cost of the first good.
b) One point impossible for the economy to achieve would be point G (on the second graph). One inefficient point the economy could achieve is point F (on the second graph).
c) The Hawks would want point B, and the Doves would want H.
d) The Hawks would receive the larger piece dividend since their increased butter production would be greater than the increased butter production by the Doves. (In other words, the Hawks have a smaller opportunity cost to make butter at the expense of guns, compared to the Doves.)
Work Step by Step
b) Point G is outside the production possibilities frontier, and point F is inside the production possibilities frontier. However, point F is not on the production possibilities frontier, so that is why point F is not efficient.
c) More guns than butter are produced at point B, and more butter than guns are produced at point H.
d) We could say that there would be 150 pounds of butter and 550 guns produced at point B, and there would be 525 pounds of butter and 200 guns produced at point H. If both parties were to reduce the number of guns desired by 100, the new quantities of guns produced would be 475 and 100 (for the Hawks and Doves, respectively).
With the Doves' 100 guns in the economy, the butter produced would increase by 75 pounds to 600 pounds (point H' on the graph). With the Hawks' 450 guns in the economy, the butter produced would increase by 225 pounds to 375 pounds (point B' on the graph).
