The Production Possibilities Curve
Explore: How does a production possibilities curve reflect opportunity cost?

This interactive graph illustrates the units of guns and butter that can be produced with the currently available resources and technology of a hypothetical economy. Each point on the curve represents the greatest combinations of butter and guns society can produce. Producing more guns means producing fewer pounds of butter. Likewise, producing more pounds of butter means producing fewer guns. The graph shows that, initially, the society chooses to produce 200 guns and 7,000 pounds of butter. Change the production mix and investigate opportunity costs by dragging the green triangle on the guns axis to the left or right. Clicking again on the triangle will establish that combination as a starting point. Click the Reset button to start over.

1. If economy produces 200 guns (point "C" on the graph), how many pounds of butter can be produced?
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2. Starting from 200 guns, what is the opportunity cost of producing 100 more guns?
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3. What happens to the opportunity cost of guns as even more guns are produced? What economic principle does this illustrate?
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4. What happens to the opportunity cost of butter as butter production is increased? What economic principle doe this illustrate?
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