Is a production possibilities frontier (PPF) for Happyland, a country that produces only two goods-wine and cheese. wine cheese a) Explain what the production possibilities frontier is and how it illustrates scarcity. b) What happens to the marginal opportunity cost of cheese production in Happyland as the Country increases its cheese production? (increase, decrease, unchanged or indeterminate?)

Introduction to the Production Possibilities Curve (PPC) As you know, the basic economic problem is scarcity. Since we do not have enough scarce resources to satisfy everyone's needs and wants, we all have to make choices. We must choose how to spend our time, our energy, our money, and our material possessions, and for every choice that is made, a cost is suffered. The relationship between choice and cost can be shown in a graph called a production possibilities curve, or PPC. For example, consider a student who has 4 hours of free time in the evening. He or she can choose to spend some, all, or none of those 4 hours studying for a test the following day. He or she could also use the time to catch up on sleep. These choices can be graphed: Choice A - spend all 4 hours studying Choice B- spend 2 hours studying, and 2 hours getting extra sleep Choice C- spend all 4 hours sleeping Of course, other combinations of the 4 hours exist. The student could study for 3.5 hours, and get an extra…

12. How are scarcity and shortage different from each other? a) scarcity affects parts of society and shortage affects everyone b) scarcity affects evryone and shortage affects parts of society c)Scarcity is temporary and shortage is permantent d) scarcity is permanent and shortage is temporary

08. What are the relative prices (opportunity costs) of wine and cloth?     a) wine costs 1/2 yard of cloth per bottle in England     b) cloth costs 1/2 bottle of wine/yard in England     c) cloth costs 4 man-hours/yard in Portugal     d) cloth costs 2 bottles of wine/yard in Portugal     e) wine costs 3 bottles of wine/yard in Portugal