Problem Set 1

Problem Set 1 - Economics 5 Principles of Economics George...

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Economics 5 Principles of Economics George Norman Spring 2008 Problem Set 1: Deadline 5 p.m. February 8, 2008 Note: You should leave your answers in the folder for your TA in the Economics Department Office 1. Consider the following production possibility curve. Thousands Manufactures Agriculture B A a) What will happen to the opportunity cost of manufactures if we move from point A to point B? Explain why. b) Suppose that the country is at point A and there is a technological innovation that significantly improves manufacturing productivity. What impact do you think that this will have on the relative price of manufactured goods? Explain why, given that there is a direct connection between relative prices and opportunity cost. 2. Tom and Hank are stranded on a desert island, where they can either hunt rabbits or fish for sea trout. Tom can catch 16 rabbits or 8 trout per day while Hank can catch 2 rabbits or 4 trout per day. a)
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Problem Set 1 - Economics 5 Principles of Economics George...

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