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Unformatted text preview: Rice University ECON 211, Fall 2007 Problem Set 1 Due on Thursday/Friday, September 6/7 1. ( 30 pts. ) State whether each of the following is a Pareto improvement and briefly explain your answer. a) A mugger steals your wallet. b) Two children voluntarily trade their baseball cards. c) A father first divides $10 equally between his son and daughter, he then takes the $5 from his son and gives all 10 dollars to his daughter. 2. ( 24 pts. ) Tom is stranded on a desert island and can either fish or harvest dates. Six points on his production possibilities frontier are given in table below. Possibility Dates gathered Fish caught A 54 B 50 1 C 42 2 D 32 3 E 20 4 F 5 a) Plot these possibilities on a Dates gathered-Fish caught grid, label the points, and draw the PPF. b) If Tom moves from possibility C to D, what is the opportunity cost per fish? c) In general, what happens to the opportunity cost of a fish as more fish are caught? What about the opportunity cost of dates as more dates are harvested?opportunity cost of dates as more dates are harvested?...
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- Spring '08