ECO 201 HW 1 solution key
Problems and Applications
1.
a.
See Figure 2. If Maria spends all five hours studying economics, she can
read 100 pages, so that is the vertical intercept of the production
possibilities frontier. If she spends all five hours studying sociology, she
can read 250 pages, so that is the horizontal intercept. The opportunity
costs are constant, so the production possibilities frontier is a straight line.
Figure 2
b.
It takes Maria two hours to read 100 pages of sociology. In that time, she
could read 40 pages of economics. So the opportunity cost of 100 pages of
sociology is 40 pages of economics.
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2.
a.
Workers needed to make:
One Car
One Ton of Grain
U.S.
1/4
1/10
Japan
1/4
1/5
b.
See Figure 3. With 100 million workers and four cars per worker, if either
economy were devoted completely to cars, it could make 400 million cars.
Because a U.S. worker can produce 10 tons of grain, if the United States
produced only grain it would produce 1,000 million tons. Because a
Japanese worker can produce 5 tons of grain, if Japan produced only grain
it would produce 500 million tons. These are the intercepts of the
production possibilities frontiers shown in the figure. Note that because
the tradeoff between cars and grain is constant for both countries, the
production possibilities frontiers are straight lines.
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 Summer '09
 SHOONLAI
 Economics, Opportunity Cost, japan

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