Assignment over Chapter 1 Material
Problem 1
Use the table below to answer the following questions:
| Submarines | Railroads | |
| Output of Subs | Output of Railroads | |
| A | 5 | 0 |
| B | 4 | 2.0 |
| C | 3 | 3.0 |
| D | 2 | 3.8 |
| E | 1 | 4.5 |
| F | 0 | 5.0 |
What is the opportunity cost of:
a) the second submarine?
b) the third submarine?
c) the fourth submarine?
HINT: The Opp Cost of Two Submarines
is 1.2 Railroads. What is the Opp Cost of the second submarine,
that is, what is given up to go from 1 to 2 submarines?
Problem 2
Suppose you have only $20 to spend on two goods, donuts (which cost $1 each) and ice cream
(which costs $2 a sundae). Draw the consumption-possibilities curve that illustrates
the choices you face.
What is the opportunity cost of an ice cream sundae in this case?