103assignments summer09 - Principles of Microeconomics Neil...

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Principles of Microeconomics Neil Roberts ECON 103 Summer 2009 Assignment #1 (25 marks) Due: Monday, May 25, 2009 1. A simple economy has 100 workers and produces only two goods – coffee and doughnuts. Labour is the only factor of production, but some workers are better suited to producing coffee than doughnuts (and vice versa). The table below shows the maximum amount of output of each good possible from various levels of labour input. Number of workers producing coffee Monthly production of coffee (hundreds of pounds) Number of workers producing doughnuts Monthly production of doughnuts (hundreds) 0 0 0 0 25 20 25 150 50 45 50 400 75 65 75 550 100 70 100 600 a) On graph paper, plot the production possibilities frontier for this economy. (4 marks) b) If the economy is currently producing 2000 pounds of coffee (20 hundreds) and 55 000 doughnuts (550 hundreds), what is the opportunity cost of producing another 2500 pounds (25 hundreds) of coffee? (2 marks) c) Can this economy produce 40 000 doughnuts and 4000 pounds of coffee? Explain.
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