Budget Line And Production-Possibilities Curve Worksheet

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BUDGET LINE AND PRODUCTION-POSSIBILITIES CURVE
1)
Nick has $48 to spend on bags of Fritos® and pizzas. If the bags of Fritos® cost $3 apiece, and
each pizza costs $12; answer the following.
a)
Draw Nick’s budget line, with correct labels.
b)
At each point on the budget line, how much money is Nick spending?
c)
What is the maximum number of items Nick can buy if he must stay on his budget line?
d)
What is the minimum number of items Nick can buy if he must stay on his budget line?
e)
Can Nick buy: i)
two pizzas and nine bags of Fritos®?
ii)
three pizzas and three bags of Fritos®?
iii)
one pizza and eight bags of Fritos®?
f)
If Nick’s budget shrinks to $24, show his new budget line?
2)
Vandelay Industries builds yachts and sailboats. Its production alternatives are shown by the
following chart:
A
B
C
D
E
Type of Product
Yachts
0
1
2
3
4
Sailboats
15
13
10
6
0
a)
Draw the production-possibilities curve for Vandelay Industries.

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