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ch1answers - CHAPTER 1 THE CHALLENGE OF ECONOMICS PROBLEMS...

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1 THE CHALLENGE OF ECONOMICS PROBLEMS 1. According to Figure 1.1, what is the opportunity cost of increasing consumer output  from OF to OD? In figure 1.1, the move from OF to OD along the consumer goods axis moves the  economy from point X to point C on the production possibilities curve.  As a result,  the economy must give up G minus E military goods. 2. Draw a production possibilities curve based on Table 1.1, labeling combinations A-F.  What is the opportunity cost of producing 100 missiles? Chapter 1 - The Challenge of Economics – page 1 CHAPTER 1 Production Possibilities Curve F E D C B A 0 20 40 60 80 100 120 0 50 100 150 200 250 300 Quantity of Missiles
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The opportunity cost of producing 100 missiles is a reduction in the production of  houses from 100 to 75, or a loss of 25 houses. 3. Assume that it takes 4 hours of labor time to paint a room and 3 hours to sand a floor.  If  all 24 hours were spent painting, how many rooms could be painted by one worker?  If a  decision were made to sand two floors, how many painted rooms would have to be given  up?  Illustrate with a production-possibilities curve. Production Possibilities Curve 0 2 4 6 8 10 0 1 2 3 4 5 6 7 Rooms Painted Floors Sanded If all 24 hours were spent painting, it would be possible to paint a total of six rooms  (24/4 = 6).  If you wanted to sand two floors, it would take a total of six hours (3  hours per floor x two floors).  In these six hours, you could have painted 1½ rooms,  thus the opportunity cost of sanding two floors is not paining 1½ rooms. 4.
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This note was uploaded on 04/18/2008 for the course ECON 201 taught by Professor Bertaux during the Spring '08 term at Xavier.

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ch1answers - CHAPTER 1 THE CHALLENGE OF ECONOMICS PROBLEMS...

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