Name Key

A. Rosencrantz

Only two goods are produced in the country of Rosencrantz, coffee and Danish.  The daily production possibilities schedule for these goods in given below

1. What is the opportunity cost, expressed in terms of boxes of Danish, of increasing coffee production in this economy from 2 pots to 3 pots? 4 boxes danish

2. The opportunity cost, expressed in terms of pots of coffee, of increasing Danish production from 15 to 20 boxes is  2 pots of coffee

3. True or False: Given existing resources, institutions and technology Rosencrantz can produce 2.5 pots of coffee and 10 boxes of Danish.  True False

4. True or False: Given existing resources, institutions and technology Rosencrantz can produce 4.5 pots of coffee and 10 boxes of Danish.  True False

5. True or False: Rosencrantz's PPC exhibits the law of increasing cost. True False

6. A new baking technique is discovered that increases Danish production by 50%, holding resources constant.  What is the opportunity cost of increasing coffee production in this new economy from 2 pots to 3 pots? 6 boxes danish

B. Guildenstern

The country of Guildenstern also produces only two goods: Oatmeal and Operas.  Both are produced with labor only.  It takes 10 units of labor to produce a ton of oatmeal and 50 units of labor to produce an opera.  Guildenstern's daily labor supply is 1000 units.

7. What is the greatest amount of oatmeal that can be produced per day in Guildenstern?   100 tons oatmeal

8. What is the greatest amount of operas that can be produced per day in Guildenstern?   20 peras

9. What is the opportunity cost of producing an additional opera in Guildenstern?   5 tons oatmeal foregone

10. What is the opportunity cost of producing an additional ton of oatmeal? 1/5 of an opera

11. One day Guildenstern produced the same number of operas as tons of oatmeal. How many of each were produced? Oatmeal  16 2/3 Operas   16 2/3