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Jasmine’s Snack Shop sells two brands of potato chips. She produces them by buying them from a wholesale supplier. Brand X costs Jasmine $1 per bag, and Brand Y costs her $1.40. Draw Jasmine’s production possibilities frontier if she has $280 budgeted to spend on the purchase of potato chips from the wholesaler. Why is it not “bowed out”?

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Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

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Chapter
Section
BuyFindarrow_forward

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
Chapter 3, Problem 4TY
Textbook Problem
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Jasmine’s Snack Shop sells two brands of potato chips. She produces them by buying them from a wholesale supplier. Brand X costs Jasmine $1 per bag, and Brand Y costs her $1.40. Draw Jasmine’s production possibilities frontier if she has $280 budgeted to spend on the purchase of potato chips from the wholesaler. Why is it not “bowed out”?

To determine

The J's production possibility curve and the reason for not "bowed out".

Explanation of Solution

The price of potato chips X is $1 and price for chips Y is $1.40. The budget available for J is $280. Hence, the liner equation is 1x + 1.40y = 280 . So, the various combination or bundle can be obtained from the given equation.

Various combinations of two goods which J can purchase:

Equation, 1x + 1

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