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ps1key - Economics 102 Kelly Fall 1999 Homework#1 Answer...

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Economics 102: Kelly Fall 1999 Homework #1 – Answer Key Due Sept 14 Question 1. Use the production possibility frontier (the curve joining points A and B) shown below to answer question one. Wisconsin’s Production Possibilities Frontier (PPF) corn K A E X S H F O J B M cheese a) Are there any non- feasible production points? If so, what are they and why are they non - feasible? (1 pt.) E,F, K,M. They lie outside the PPF. b) Given the current PPF (the curve joining points A and B) would Wisconsin choose to produce at point H? Why or why not? (1 pt.) No; Wisconsin would prefer to produce on the curve joining A&B (the PPF) since points interior to the PPF represent unemployment or underemployment of resources. c) Given the graph above, Wisconsin’s opportunity cost of producing more cheese in terms of corn changes in what way as we move from point A to B? Give the definition of the law this illustrates. (2 pts.) Increases; Law of increasing opportunity cost: the more of something that is produced the greater is the opportunity cost of producing one more unit.
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