ECON

# HW 2 answers - Economics 101-300 Winter 2006 Homework...

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Economics 101-300 Winter, 2006 Homework Problem Set # 2 Problems: 1) Suppose that firms in the economy produce only flash usb drives and hard drives. The schedule table below shows the various combinations of flash usb drives and hard drives (in millions per year) that can be produced if the economy employs all of its resources fully and efficiently. a) Measured in terms of the number of flash usb drives that must be given up, the cost of producing 9 million hard drives per year rather than 5 million is how many million flash usb drives per year? b) If current production is 6 million flash usb drives and 9 million hard drives, what is the opportunity cost of producing another 5 million hard drives? Production Choices flash usb drives (in millions) hard drives (in millions) A 0 15 B 2 14 C 4 12 D 6 9 E 8 5 F 10 0 a.) 8 million flash drives minus 6 million flash usb drives = 2 million flash usb drives. b.) That’s 14 million hard drive produced, which means 2 million flash usb drives can be produced, which means the answer is 6 million minus 2 million flash usb drives equals 4 million flash usb drives. 2) Here is an example of how a topic addressed in the previous question might be presented as a multiple choice problem: This economy produces two goods: flash usb drives and hard drives (in millions). What is the opportunity cost of moving from point a to b and c to b , respectively? 8 flash usb drives (in millions) hard drives (in millions) a c b 6 2 5 9 14

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a) 2 million flash usb drives, 5 million hard drives b) 2 million flash usb drives, 4 million flash usb drives c) 5 million hard drives, 2 million flash usb drives d) 5 million flash usb drives, 2 million hard drives e) 4 million hard drives, 5 million hard drives 3) Maria can type a 10 page report in one hour. She can also knit three baby booties in one hour. What is Maria’s opportunity cost of producing a report?
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