Section+Exercise+2+solutions-1

Section+Exercise+2+solutions-1 - Department of Economics...

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Unformatted text preview: Department of Economics Spring 2011 University of California, Berkeley Economics 1 Head GSI: Swetha Doraiswamy Section Exercise 2 for 1/25/11 & 1/26/11 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 B 60 12 C 45 22 D 30 30 E 15 36 F 40 a) Using the data in the table, graph the production possibilities frontier (ppf) (with beef on the vertical axes). Production Possibilities Frontier 5 10 15 20 25 30 35 40 45 20 40 60 80 Cornbread (loaves) PPF b) Does the principle of increasing opportunity cost hold in this nation? Explain briefly. ( Hint: What happens to the opportunity cost of cornbread measured in units of beef as cornbread production increases?) Page 1 of 2 Department of Economics...
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Section+Exercise+2+solutions-1 - Department of Economics...

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