Section Exercise 2 solutions

Section Exercise 2 solutions - DepartmentofEconomics 2011

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Department of Economics               Spring  2011 University of California, Berkeley         Economics 1    Head GSI: Swetha  Doraiswamy Section Exercise 2 Suggested Solutions 1) A nation with fixed quantities of resources is able to produce any of the following  combinations of cornbread and beef in a year: Combinatio n Cornbread (millions of  loaves) Beef (thousands of  pounds) A 75 0 B 60 12 C 45 22 D 30 30 E 15 36 F 0 40 a) Using the data in the table, graph the production possibilities frontier (ppf) (with beef on the  vertical axes). Production Possibilities Frontier 0 5 10 15 20 25 30 35 40 45 0 20 40 60 80 Cornbread (loaves) PPF b)  Does the principle of “increasing opportunity cost” hold in this nation? Explain briefly.  Page  1  of 2
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Department of Economics               Spring  2011 University of California, Berkeley         Economics 1
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Section Exercise 2 solutions - DepartmentofEconomics 2011

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