discussionsectionhandout2answersfall2007

discussionsectionhandout2answersfall2007 - Econ 102: Fall...

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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? A, B, C, F, G b) At which of the labeled points is North Kilttown producing efficiently? A, B, C c) If North Kilttown is currently producing at point A, what is the opportunity cost of producing 60 more pounds of haggis? Producing 60 more pounds of haggis means moving from A to C, which has an OC of 30 kilts. d) If North Kilttown is currently producing at point C, what is the opportunity cost of producing 20 more kilts? Producing 20 more kilts means moving from C to B, which has an OC of 30 pounds of haggis. 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? The OC making kilts rises due to the specialization of resources used to make the two goods. f) A new technology emerges (say, a sewing machine) which allows residents of North Kilttown to make
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discussionsectionhandout2answersfall2007 - Econ 102: Fall...

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