home2a - EC 1 Section 1 UCLA Winter 2003 A Bresnock...

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EC 1, Section 1 Student Name: UCLA TA Name/Section: Winter, 2003 A. Bresnock Homework Assignment 2 (20 points) 1. The Hobbit Council (that governs the Shire in Middle Earth) consults its production archives and believes that it is capable of making the following amounts of vegetables and cobblestones. Vegetables (000s of lbs) Cobblestones (000s of tons) 20 0 16 5 12 10 8 15 4 20 0 25 (a) Does the production possibilities frontier for vegetables and cobblestones reflect the law of increasing opportunity costs? Support your answer with verbal and graphical explanations? (Be certain to include a definition of the law of increasing opportunity costs in your answer.) What is the opportunity cost of producing an additional cobblestone? 25 20 4 5 No. Opportunity costs are constant since the PPC is linear. For every 1 unit in C, they would have to give up 4/5 of a unit of V. The opportunity cost of producing an additional cobblestone is 4/5 of a unit of vegetables and stays the same for each additional unit of cobblestone produced. (b)
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This note was uploaded on 10/26/2009 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.

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home2a - EC 1 Section 1 UCLA Winter 2003 A Bresnock...

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