y ToolsipsipsHomework (Ch 02)2. Opportunity cost and production possibilitiesSam is a skilled toy maker who is able to produce both cars and puzzles. He has 8 hours a day to produce toys. The following table shows the dailyoutput resulting from various possible combinations of his time.ChoicePUZZLESABCDE30252015Hours Producing(Cars)(Puzzles)802106420468(Cars)432On the following graph, use the blue points (circle symbol) to plot Sam's initial production possibilities frontier (PPF).NO1Produced0(Puzzles)010161920Initial PPFYour Mac will sleep sinto a power outlet.New PPF* PUZZLES2015105001234CARS5678Initial PPFNew PPFSuppose Sam is currently using combination D, producing one car per day. His opportunity cost of producing a second car per day isper day.Now, suppose Sam is currently using combination C, producing two cars per day. His opportunity cost of producing a third car per day▼ per day.isFrom the previous analysis, you can determine that as Sam increases his production of cars, his opportunity cost of producing one morecarSuppose Sam buys a new tool that enables him to produce twice as many cars per hour as before, but it doesn't affect his ability to produce puzzles.Use the green points (triangle symbol) to plot his new PPF on the previous graph.Because he can now make more cars per hour, Sam's opportunity cost of producing puzzles isit was previously.

The trade-off between two items that a company or a country produces using the quantity of resources…

Sam is a skilled toy maker who is able to produce both cars and puzzles. He has 8 hours a day to produce toys. The following table shows the daily output resulting from various possible combinations of his time. Choice ABCDE Hours Producing (Cars) (Puzzles) 8 0 6 2 4 4 2 6 0 8 Produced (Cars) 4 3 2 1 0 (Puzzles) 0 10 16 19 20

Sam is a skilled toy maker who is able to produce both cars and puzzles. He has 8 hours a day to produce toys. The following table shows the daily output resulting from various possible combinations of his time. Choice ABCDE Hours Producing (Cars) (Puzzles) 8 0 6 2 4 4 2 6 0 8 Produced (Cars) 4 3 2 1 0 (Puzzles) 0 10 16 19 20

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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PROBLEM (1) Suppose a consumer has just enough money to afford the bundle of 3 apples and 2 oranges, and similarly she also has just enough money to afford the bundle of 2 apples and 4 oranges. (a) Denoting the number of apples with x and oranges with y, plot the two given bundles on a graph, and calculate the relative price of apples; px/ py. (b) If she buys only apples with her budget, how many can she buy? If she buys only oranges, how many can she buy? Write down the budget equation for the consumer. (Notice that knowing two points on the budget line, you can write down the budget equation, even though you weren't given the prices nor the income explicitly!) (c) Suppose MUx = 20 and MUY = 30 at some point on the budget line. Is she maximizing utility by choosing this bundle? If not, should she buy fewer apples (and more oranges), or more apples (and fewer oranges), to increase her utility? (d) Forget about (c); instead, you learn that her utility function is u(x,y) = Axy³. What is…