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Problem Set #1 answer

Problem Set #1 answer - Econ 101 1(a ANSWERS TO PROBLEM SET...

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Econ 101 ANSWERS TO PROBLEM SET 1 Professor Wissink Cornell University l (L ) l ) limes 1.(a) mp = S)))))) Workers in limes limes L ) labor ))))))))))))))))))))))))))))))))))))))))))))))))))))) 0 0 ))))))))))) 5 1 5 ))))))))))) 3 2 8 ))))))))))) 1 3 9 c (L ) c ) coconuts mp = S)))))))) Workers in coconuts coconuts L ) labor )))))))))))))))))))))))))))))))))))))))))))))))))))))) 0 0 )))))))))) 1 1 1 )))))))))) 1 2 2 )))))))))) 1 3 3 (b) The law of diminishing marginal returns applies only in limes; not in coconuts. In limes the mp decreases with each additional worker, whereas, in coconuts, the mp L L is constant. (c) l c Q Q L L Q limes Q coconuts Q Q l c Q Q L = 3 L = 0 Q 9 Q 0 Q Q l c Q Q L = 2 L = 1 Q 8 Q 1 Q Q l c Q Q L = 1 L = 2 Q 5 Q 2 Q Q l c Q Q L = 0 L = 3 Q 0 Q 3 (d) Let MOC = marginal opportunity cost of coconuts in terms of limes. Let TOC = c c total opportunity cost of coconuts in terms of limes.
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APS1 2 T T ) l T coconuts * limes * MOC = S) * TOC * * c ) c * c * * * 0 * 9 * * * * 1 * 1 * 8 * * 1 * * 3 * 2 * 5 * * 4 * * 5 * 3 R 0 R R 9 l T c T l c T T (e) Now, L * limes L * coconuts L L * limes * coconuts S))3)))))Q S))3)))))))))Q S)))))))))))3))))))))3)))))))))Q * * l c * * 0 * 0 0 * 0 L =3 L =0 * 9 * 0 * * * * * * l c * * 1 * 5 1 * 2 L =2 L =1 * 8 * 2 * * * * * * l c * * 2 * 8 2 * 4 L =1 L =2 * 5 * 4 * * * * * * l c * * 3 R 9 3 R 6 L =0 L =3 R 0 R 6 Pick any point on the old PPF.
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