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001_HWanswer1

001_HWanswer1 - Econ 1 Winter 2008 Dr Narag 1 Homework 1...

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Econ 1 Winter 2008 Dr. Narag 1 Homework 1 : Production Possibilities (Answer Key) (1) Suppose Jane’s production possibility frontier (PPF) for corn and cloth is initially described in the following table: Possibility Corn (1 lbs./mo.) Cloth (yds/mo.) A 20 0 B 18 1 C 15 2 D 11 3 E 6 4 F 0 5 a) Draw Jane’s PPF and explain what this curve represents. PPF represents maximum or full production possible from utilization of all resources to produce various combinations of corn and/or cloth. (point in time; full employment of all resources) b) Determine the opportunity costs associated with moving from point A to point B, B to C, C to D, D to E, and E to F. Are the opportunity costs you determined increasing, decreasing, or constant? Explain your answer. PPF A (0,20) B (1,18) C (2,15) D (3,11) E (4,6) F (5,0) 0 2 4 6 8 10 12 14 16 18 20 0 1 2 3 4 5 Cloth (yds/mo) Corn (lbs/mo)
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Econ 1 Winter 2008 Dr. Narag 2 Opportunity Costs Move A B 2 Corn Move B C 3 Corn Move C D 4 Corn Increasing opportunity Move D E 5 Corn costs Move E F 6 Corn c)
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