Quiz 1 - 3 False because to increase the clothing...

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Rohit Banerjee September 6, 2007 Section I Quiz 1 1. True because there are a total of 400 labor units as stated in the text. Taking into account the fact that it takes four units of labor to produce one unit of food, if the total labor source is moved to producing only food, then the maximum units of food produced can only be 400/4 = 100 units. 2. False because the country needs both food and clothing to subsist and would not focus its entire labor force on producing only one commodity. Furhermore, the opportunity cost for increasing a clothing unit by one is just one worker. Four workers, the amount of labor required to create one food unit, could create four units of clothing making the opportunity cost to increase clothing production very attractive.
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Unformatted text preview: 3. False because to increase the clothing production by one unit requires only one worker whereas it takes four to create a food unit. Rather the opportunity cost of one unit of food is four units of clothing. 4. False, the production possibilities curve for this country is a straight line because the opportunity cost stays constant no matter what sector labor is diverted to. Had the opportunity cost increased as one moved towards the extremes, then the PP curve would have been concave. 5. False the opportunity cost of clothing production stays the same no matter what fraction of the labor force is concentrated on making clothing. That is why the PP curve is a straight line and not a curved (concave) line....
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This note was uploaded on 07/14/2008 for the course ECON 73100 taught by Professor Klepper during the Fall '07 term at Carnegie Mellon.

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