Problem Set #1

# Problem Set #1 - Problem Set#1 Economics 180.102 Summer...

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Problem Set #1 Economics 180.102 – Summer Session I Due 6/6/11 1. What are all of the opportunity costs associated with attending college? 2. Chris and Pat are roommates. They spend most of their time studying (of course!) but they leave some time for their favorite activities: making pizza and brewing root beer. Pat takes 4 hours to brew a gallon of root beer and 2 hours to make a pizza. Chris takes 6 hours to brew a gallon of root beer and 4 hours to make a pizza. Suppose they can dedicate 12 hours to this activity each week. a. Draw each person’s PPF. b. What is each roommate’s opportunity cost of making a pizza? Who has the absolute advantage in making pizzas? Who has the comparative advantage? c. If Pat and Chris trade food with each other, who will trade away pizza in exchange for root beer? d. Prior to becoming roommates and trading food, Pat had dedicated 4 hours to root beer brewing and 8 hours to pizza making and Chris had spent 6 hours brewing root beer and 6 hours making pizza.

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