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Principles Of Microeconomics Worksheet With Answer Key - Professor Dowell, Cosumnes River College

Name: ____Solutions_____

Cosumnes River College

Principles of Microeconomics

Problem Set 1

Due January 29, 2015

Spring 2015

Prof. Dowell

Instructions: Write the answers clearly and concisely on these sheets in the spaces

provided. Do not attach extra sheets.

1. The following graph shows the production possibilities frontier for a small country in the

Caribbean.

Production Possibilities Frontier

180

160

140

120

100

0 10 20 30 40 50 60 70 80 90 100

Sugar

a. If the country is currently producing 180 coconuts and 0 sugar, how many coconuts must

they give up to make 20 sugar?

b. If the country is currently producing 100 coconuts and 60 sugar, how many coconuts must

they give up to move to 80 sugar?

c. Does this country have increasing opportunity costs? Explain how you know that they do or

do not and what it means to have increasing opportunity costs.

Yes. The PPF gets steeper or is bowed out moving from 180 coconuts and zero units of sugar

to zero coconuts and 100 units of sugar. The answers to a and b also illustrate the

increasing opportunity cost.

d. Give an example of a combination of coconuts and sugar that is attainable but not efficient

and an example that is not attainable.

Any point that lies under the PPF, such as point A (representing 100 coconuts and 40 units of

sugar) is attainable but not efficient. Any point above the PPF such as B (representing 120

coconuts and 80 units of sugar) is unattainable.

Principles of Microeconomics: Problem Set 1 Solutions

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Principles Of Microeconomics Worksheet With Answer Key - Professor Dowell, Cosumnes River College