Unformatted text preview: (a) Draw the production possibility frontier. Explain the difference in the shape of the PPF as compared to the ones drawn in the lecture. (b) How many workers are there in each industry when the economy is producing 400 pizzas? (c) What is the opportunity cost of a pizza when the economy is producing (i) 400 pizzas, (ii) 600 pizzas? Now suppose that the maximum capacity of the brewery is reduced to 250 pints per day. Any extra beer has to be produced by home brewing in which a worker can only produce 2 pints per day. (d) Draw the new production possibility frontier. (e) What is the opportunity cost of a pizza when the economy is producing (i) 400 pizzas, (ii) 600 pizzas? Terms to review and understand from week 2 lectures: production possibility frontier opportunity cost absolute advantage; comparative advantage price taker excess supply; excess demand rationing....
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This note was uploaded on 03/15/2012 for the course EC 111 taught by Professor Timhatton during the Spring '12 term at Uni. Essex.
- Spring '12