Answered: Suppose a new drug was discovered that…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter1: The Role And Method Of Economics

Section: Chapter Questions

Problem 7P

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Suppose a new drug was discovered that slowed the deterioration of health that accompanies aging. (All the graphs you draw should include labels, down and right arrows to indicate the changes before and after the new drug were discovered).

a.) What's the effect on optimal health H^*? Draw its marginal efficiency of capital (MEC) curve.

b.) What's the effect on the available time for work T^w and play T^z? Draw its labor–leisure graph including both budget constraints and indifference curve.

c.) Draw the production possibilities frontier. Explain it.

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