Assignment over Chapter 1 Material
Problem 1
Answer the following questions using the data below. You may choose to use graph paper
or a spreadsheet program (e.g. EXCEL), if you prefer.
| Beer | Pizza | |
| A | 50 | 0 |
| B | 40 | 2 |
| C | 30 | 4 |
| D | 20 | 6 |
| E | 10 | 8 |
| F | 0 | 10 |
a. Graph the production possibility curve above.
b. Calculate the opportunity cost of producing one pizza (show your work).
c. Calculate the opportunity cost of producing one beer (show your work).
d. Suppose the economy above produced 25 beers and 4 pizzas. Graph this point. Give a possible explanation for this inefficient level of production.
Suppose the labor force of this economy doubled in size. The new production possibilities curve is:
| Beer | Pizza | |
| A | 60 | 0 |
| B | 48 | 3 |
| C | 36 | 6 |
| D | 24 | 9 |
| E | 12 | 12 |
| F | 0 | 15 |
e. Graph the new production possibility curve on the same graph. What is the new opportunity cost of producing one pizza (show your work)?