South Korea is economically advanced relative to North Korea by all the standard measures of economic well-being (e.g., per capita income, GDP, food consumption). North Korea devotes a larger proportion of its economic resources to military/defense endeavors than does South Korea. And yet South Korea spends more on military/defense than does North Korea.
a. Using the economic principle of the Production Possibility Curve (PPC) (or Production Possibility Frontier), show these characteristics of the two Korean countries in terms of consumer goods ("butter") and military goods ("guns'). Remember to label each axis.
b. If the South Korean economy grew from 2010 to 2012, but all of the growth took place in the consumption sector (i.e., in "butter"), draw what the 2012 PPC for South Korea would look like compared to the 2010 PPC.
c. Why is the Production Possibility Curve typically drawn concave from below (i.e., bulging outward)?