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Economics 100 – Key for Problem Set #1
Spring 2007
Page 1 of 3
1.
Consider the following production possibilities for the Swiss and German economies
(12 total points: 2 points each)
Switzerland
Germany
Clocks
(millions)
Chocolates
(millions of tons)
Clocks
(millions)
Chocolates
(millions of tons)
4
0
12
0
2
5
6
3
0
10
0
6
a. In
Switzerland
, the opportunity cost of producing one more clock in terms of chocolates is
loss in chocolates
10 chocolates
5
2.5 chocolates per one clock
gain in clocks
4 clocks
2
Swiss
clocks
OC
==
=
=
b. In
Germany
, the opportunity cost of producing one more clock in terms of chocolates is
loss in chocolates
6 chocolates
1
0.5 chocolates per one clock
gain in clocks
12 clocks
2
Germany
clocks
OC
=
=
c. and d.
0
2
4
6
8
10
12
14
02468
1
0
1
2
chocolates (millions)
clocks (millions)
Sw iss Production Possibilities
German Production Possibilities
World Consumption Possibilities
Swiss ppc
German ppc
consumption
possibilities
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e.
With specialization and international trade, what is the
world
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 Spring '07
 Kasilwal
 Economics, Macroeconomics

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