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# PS2 - METU Department of Economics Econ 101 Introduction to...

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1 / 8 METU Department of Economics Econ 101 Introduction to Economics I Sections 01-02-03 Fall 2011 PROBLEM SET # 2 (CHAPTER 1 & CHAPTER 2) PART A: PROBLEMS 1. According to the information given below: Combination Meat (units) Wheat (units) A 0 2000 B 200 1800 C 400 1500 D 600 1100 E 800 600 F 1000 0 a) Draw the production possibility frontier (PPF) (put meat on the x-axis) b) The production possibilities frontier is ______ to the origin. (concave /convex) c) Can this economy produce 200 units of meat and 1500 units of wheat? d) Can this economy produce 200 units of meat and 2200 units of wheat? e) What is the opportunity cost of increasing meat production from 200 units to 400 units (i.e. if the economy moves from combination B to combination C)? What is the opportunity cost per unit of meat? f) What is the opportunity cost of increasing meat production from 400 units to 600 units (i.e. if the economy moves from combination C to D)? What is the opportunity cost per unit of meat? g) Does the principle of “increasing opportunity cost” hold in this economy? 2. Fill in the blanks according to the figure below: 0 50 100 140 150 Roses (units) Guns (units) 150 140 100 a d e b g c

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2 / 8 a. If this economy is producing 100 units of roses, the maximum amount of guns that can be produced is ___ units. b. The maximum quantity of roses that can be produced is ___ units. c. Assume that production takes place at point c. The opportunity cost of increasing the production of guns to 100 units is ___ units of ___. d. Assume that production takes place at point g. The opportunity cost of increasing the production of guns to 100 units is _. e. Assume that production takes place at point a. The opportunity cost of increasing the production of roses to 100 units is ___ units of ___. f. Assume that production takes place at point e. The opportunity cost of increasing the production of roses to 100 units is ___. g. The efficient point(s) is/are ___. h. The inefficient point(s) is/are ___. i. The unattainable point(s) is/are ___. j. The attainable point(s) is/are ___. 3. Answer the following questions according to the figure. i. Which one of the following choices implies efficient production in terms of full employment of the resources? a) Both 20 units of wheat and 10 units of eggs b) Both 20 units of wheat and 5 units of eggs c) Both 100 units of wheat and 50 units of eggs d) Either 100 units of wheat or 50 units of eggs ii. Which of the following choices implies inefficient production a) 100 units of wheat and 0 units of eggs b) 80 units of wheat and 5 units of eggs c) 20 units of wheat and 40 units of eggs d) 50 units of wheat and 25 units of eggs
3 / 8 iii. Which of the following choices implies unattainable production a) 30 units of wheat and 40 units of eggs b)

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