discussionsectionhandout2fall2007

discussionsectionhandout2fall2007 - Econ 102: Fall 2007...

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Econ 102: Fall 2007 Discussion Section Handout #2 Example 1 The above picture describes the production possibilities set for North Kilttown, a community which can produce either kilts (K) or pounds of haggis (H) every day. a) At which of the labeled points is it feasible for North Kilttown to produce? b) At which of the labeled points is North Kilttown producing efficiently? c) If North Kilttown is currently producing at point A, what is the opportunity cost of producing 60 more pounds of haggis? d) If North Kilttown is currently producing at point C, what is the opportunity cost of producing 20 more kilts? e) What happens to the opportunity cost of producing more kilts as we move from point C to point A? Why might this be happening? f) A new technology emerges (say, a sewing machine) which allows residents of North Kilttown to make kilts with half as much labor time, but does not affect haggis production in any way. Draw the new PPF after the invention of this technology on the graph below. The PPF from before the invention of this technology is drawn for your reference.
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discussionsectionhandout2fall2007 - Econ 102: Fall 2007...

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