EC 101 Discussion Problems Chapter 3 with Answers

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Production Possibilities Curves (new) - Saved - o Search Ac Layout References Mailings Review View Help Production Possibilities Curves Assignment Suppose that Crystal Falls produces sports drinks and bottles of water. Below are the possible combinations of sports drinks and bottles of water that Crystal Falls can produce. Combination Sports drinks (X axis) Bottles of water (Y axis) A 32 12 27 22 20 30 11 36 A On the graph below, plot the Production Possibilities Curve for Crystal Falls B. What is the opportunity cost of the first twWelve sports drinks produced? C. What is the opportunity cost of increasing production from 12 sports drinks to 22 sports drinks? D. What is the opportunity cost of increasing production from 22 sports drinks to 30 sports drinks? E. What is the opportunity cost of increasing production from 30 sports drinks to 36 sports drinks? F What is happening to the opportunity cost as Crystal Falls produces more sports drinks? What is the onnorhinty cost of the first…

1. Use the graph below to calculate Peter’s opportunity cost of an hour of tennis when he increases the time he plays tennis from: a) 4 to 6 hours a week. b) 6 to 8 hours a week. c) describe the relationship between the time Peter spends playing tennis and the opportunity cost of an hour of tennis.

5. Opportunity cost and production possibilities Sam is a talented artist who sells hand-crafted goods on his website. Sam currently crafts and sells both crochet hats and pillows. He spends 8 hours a day working on crafts. The following table gives different daily output scenarios depending on how much of his time is spent on each good. Choice A B C D E PILLOWS 30 25 20 On the following graph, use the blue points (circle symbol) to plot Sam's initial production possibilities frontier (PPF). 15 10 5 0 Hours Crafting Produced (Crochet hats) (Pillows) (Crochet hats) (Pillows) 0 0 9 15 17 18 0 8 6 4 2 0 1 2 3 2 4 6 8 4 5 CROCHET HATS 4 3 2 6 1 0 7 8 Initial PPF A New PPF (?)

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25 Initial PPC 20 New PPC 15 10 2 3 4 5 BOATS PER DAY Suppose Yvette is currently using combination D, producing one boat per day. Her opportunity cost of producing a second boat per day is per day. Now, suppose Yvette is currently using combination C, producing two boats per day. Her opportunity cost of producing a third boat per day is per day. From the previous analysis, you can determine that as Yvette increases her production of boats, her opportunity cost of producing one more boat Suppose Yvette buys a new tool that allows her to produce tvice as many boats per hour as before but doesn't affect her ability to produce balls. Use the green points (triangle symbol) to plot her new PPC on the previous graph. Because she can now make more boats per hour, Yvette's opportunity cost of producing balls is it was previously. BALLS PER DAY

Question 1 What does the Production Possibilities Frontier of a firm show and how does it relate to scarcity and budgeting? Draw the Production Possibilities Frontier for a firm producing two goods, and explain what the various positions in the diagram mean.

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Lesson 2 Assignment     Product Combo A Combo B Combo C Combo D Combo E Motorcycles 0 2 4 6 8 Surfboards 30 27 21 12 0     Graph the above production data, putting motorcycles on the horizontal axis.                       What are the opportunity costs of moving from point B to point D and from point D to point A?     Point F represents 3 motorcycles and 21 surfboards. Plot this point on your graph and explain what it represents.     Point G represents 5 motorcycles and 24 surfboards. Plot this point on your graph and explain what it represents.

Question 11 ) Listen Suppose you have a $20 Amazon gift card with which you can buy (download) songs or videos. Songs cost $1.00 each and videos cost $2.00 each. The opportunity cost of one video: a) is constant and equal to ½ song. b) is constant and equal to 2 songs. c) is $1.00. d) increases as more videos are purchased Question 12 ) Listen Which of the following is NOT true? 1) Economists view the world through the lens of scarcity. 2) The perpetual problem of scarcity forcing people and society to make choices is the basis for the definition of economics. 3) Most of the disagreement among economists involves normative economics. 4) Rationality means that choices must be made generally the same among individuals.<-- Question 13 ) Listen Which of the following does not correctly explain about the purposeful behavior that reflects "rational self- interest? O a) Sellers try to make the most profits possible from the sales of their products as many as possible. b) Consumers spend their…

QUESTION 7 Olivia and Susan operate a store that sells burritos. There are two main activities: chopping up the ingredients and then cooking the fillings for the burritos. Olivia and Susan are deciding who should chop the ingredients and who should cook the fillings in order to maximise output. Olivia Susan Chopped Food (kg/hr) 15 20 Cooked Food (kg/hr) 20 30 Which of the following statements are true: For Olivia, the opportunity cost of 1kg of cooked food is 1.33kgs (to 2 decimal places) of choppectood. For Susan, the opportunity cost of 1kg of cooked food is 0.67kgs (to 2 decimal places) of chopped food. Susan should specialise in chopping. Olivia has an absolute advantage in chopping.

2. What effect does "Increasing Opportunity Cost" have on the Production Possibilities Curve? 3. What are the four categories of Resources? Give an example of each.