Short Answer Two If a business faces a production possibilities frontier (PPF) that exhibits increasing opportunity cost, why would the business want to produce at the point along the PPF where its opportunity cost equals the relative price? Short Answer Three Define “traffic jams” as the slow movement of vehicles on a road, causing long waiting times. Use that definition to answer the following questions (which I thought of while staring at the long line of cars ahead of me on the Long Island Expressway). 1. Using supply and demand curves for roadway capacity: a. Explain why traffic jams occur. b. What non-price rationing mechanism equates the quantity of roadway capacity supplied with the quantity of roadway capacity demanded? 2. Describe three policies that the government could use to reduce traffic jams. a. Illustrate each policy with supply and demand curves. b. If the demand curve were linear, how would each policy affect the elasticity of demand for roadway capacity? Short Answer Four
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This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.