HW1_302 UIUC Ali

# HW1_302 UIUC Ali - Econ 302 First Problem Set Spring...

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Econ 302- First Problem Set Spring 2011-Ali Toossi Due: Wednesday, February 2 Monday February 7 (at the beginning of the class) All problem sets should be prepared neatly and professionally. Problem sets should be typed, stapled and should contain the following information on the right-hand corner of the page: your name , your section , homework number and date . Problem sets that are sloppy, torn from spiral-bound notebooks, or which are illegible, or unstapled, will be graded down. 1- Consider a hypothetical economy with two outputs, Hot dogs ( HD y ) and Buns ( B y ). Suppose the only input necessary is labor and there are 120 million workers available. Denote the labor employed in the hot dog industry by HD L and the labor employed in the bun industry by B L . Assume the technology for producing hot dog and bun are the same and it takes two people to produce each hotdog or each bun. a) Write down the resource constraint. b) Write down the production functions for hot dog and bun. c) Derive the equation of the production possibility frontier (PPF). d) Draw the graph of PPF. e) What is the opportunity cost of producing one more bun? Show it on the graph and also derive it by differentiation. f)

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HW1_302 UIUC Ali - Econ 302 First Problem Set Spring...

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