Problem 2 - ECON 162B-A0 A1 Fall 2010 PROBLEM SET NUMBER TWO Kenny Christianson due September 24 1 Assume the economy of Boringtown produces two

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ECON 162B-A0, A1 Kenny Christianson Fall 2010 due: September 24 PROBLEM SET NUMBER TWO 1. Assume the economy of Boringtown produces two goods, agricultural products and manufactured products. On separate production possibilities curve (PPC) graphs, show the effects of the following (Put manufactured goods on the vertical axis.): a. an increase in the labor force of Boringtown. b. the introduction of a new, more efficient tractor. c. The largest factory in Boringtown burns down. Explain why the PPC of Boringtown is concave (bowed away from the origin). 2. Assume that the economy of Travelville can produce two goods, airplanes (A) and buses (B). The production of one airplane requires two months of labor (L) and one ton of steel (S). One bus requires one month of labor and two tons of steel. Travelville is endowed with 120 months of labor and 120 tons of steel. a. Draw the production possibilities frontier (curve) for Travelville. Put airplanes (A) on the vertical axis. Assume that fractions of airplanes and buses can be built. (HINT: For different quantities of airplanes, determine how many buses can be produced. How many airplanes and buses can be produced if all resources are devoted to airplanes?
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This note was uploaded on 11/19/2010 for the course ECON 162 taught by Professor Christianson during the Spring '05 term at Binghamton University.

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Problem 2 - ECON 162B-A0 A1 Fall 2010 PROBLEM SET NUMBER TWO Kenny Christianson due September 24 1 Assume the economy of Boringtown produces two

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