The document describes a scenario where a group must allocate a $200 million budget for the country of Travistan. It lists several proposed projects and their costs, including new schools, universities, highways, military hardware, and cleaning pollution. It then poses a series of questions about producing guns (defense) vs butter (infrastructure), the production possibilities frontier, problems that could cause inefficiencies, how to shift the PPF out, and the relationship to diminishing marginal returns.

1. 1. Travistan is an enchanting and beautiful country of 10 million hard working people. In your groups
decide how to allocate the country’s budget of $200 million
New high schools: $2 million each
New universities: $5 million each
New high way system from capital city: $100 million
New Soccer stadium: $50 million
Update military hardware: $50 million
Build new military head quarters: $10 million
Recruit 1 million new soldiers: $2 million
New sewer system for capital city: $10 million
Build a wall around the country to keep out invaders: $25 million
Design new flag for country: $0 design a cool new flag for the country
Clean up capital city’s pollution problem: $2 per square inch
2. Create a PPF showing guns (defense) vs. butter (infrastructure), label your choice with an “A”,
label possible area and inefficient areas.
3. What problem might cause you to be inside the PPF? (specific to government getting the money to
the right places)
4. How could you combat the problem of #3?
5. How could you shift your PPF out? (What is it your budget based on?)
6. What would be opportunity cost of #5?
7. Why didn’t you clean up all the pollution?
8. What does your answer to #7 have to do with diminishing marginal returns?
1. Travistan is an enchanting and beautiful country of 10 million hard working people. In your groups
decide how to allocate the country’s budget of $200 million
New high schools: $2 million each
New universities: $5 million each
New high way system from capital city: $100 million
New Soccer stadium: $50 million
Update military hardware: $50 million
Build new military head quarters: $10 million
Recruit 1 million new soldiers: $2 million
New sewer system for capital city: $10 million
Build a wall around the country to keep out invaders: $25 million
Design new flag for country: $0 design a cool new flag for the country
Clean up capital city’s pollution problem: $2 per square inch
2. Create a PPF showing guns (defense) vs. butter (infrastructure), label your choice with an “A”,
label possible area and inefficient areas.
3. What problem might cause you to be inside the PPF? (specific to government getting the money to
the right places)
4. How could you combat the problem of #3?
5. How could you shift your PPF out? (What is it your budget based on?)
6. What would be opportunity cost of #5?
7. Why didn’t you clean up all the pollution?
8. What does your answer to #7 have to do with diminishing marginal returns?