E333_HW1_KEY - Econ 333 Professor McCann HW #1: Ch. 2 and...

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Econ 333 Professor McCann HW #1: Ch. 2 and Ch. 4 KEY All answers are due at the beginning of Class on 9/22/08.  Late assignments will  not be accepted.  Work must be typed, except for graphs which may be neatly  drawn.  When verbal explanations are requested, limit yourself to a few concise  sentences.  1. If a country is at a point on its PPF where the slope of the PPF is flatter than the  slope of the CIC touching that same point, then the standard of living would rise if  outputs of the two goods would change so as to move down the PPF. True or  false?  Demonstrate graphically and explain (25 points)
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This statement is TRUE. See the following graph. We start at a point  like U.  Notice that at U, the slope of the PPF is flatter (more horizontal)  than the slope of the CIC intersecting it.  If this society were to move  from a point like U, down the PPF to a point like X, society moves to a  higher CIC.  A higher CIC means society has a higher level of utility or  happiness.  Hence a movement in that direction would raise the  standard of living.
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This note was uploaded on 08/25/2009 for the course ECON 333 taught by Professor Yavas,cemilepan,lu during the Fall '06 term at Pennsylvania State University, University Park.

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E333_HW1_KEY - Econ 333 Professor McCann HW #1: Ch. 2 and...

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