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Homework 1 (10 points)
Due in discussion the week of February 2
nd
6
th
; No late HWs will be accepted
1. Below is the production possibilities table for the country of Lavaland.
(a) Use the information in the table to draw the production possibilities curve (PPC) for
Lavaland. Put tanks on the horizontal axis. (1 point)
(b) What is assumed to be constant when we draw that curve? (1 point)
When we draw the curve, the opportunity cost is assumed to be constant.
Also the economy is at
full employment, has fixed resources, has fixed technology, and is only producing two goods.
(c) What is the cost to Lavaland of moving from point A to point B on its PPC? What is the cost
of moving from point E to point F? (1 points)
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View Full DocumentThe cost from moving from point A to point B is 1 pizza.
The cost from moving from point E to
point F is 5 pizzas.
(d) What general economic principle is being illustrated by your answers to part (c) above?
Explain. (2 points)
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 Spring '05
 AlSabea
 Macroeconomics

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