Week #1 Problems
• Due Wednesday by 10:59pm
• Points 20
• Submitting a file upload
Chapter 1, Problem 7 (pg 20)
7. The table below describes the production possibilities confronting an economy. Using
that information:
a. Calculate the opportunity costs of building hospitals.
b. Draw the production possibilities curve.
c. Why can’t more of both outputs be produced?
12
14
PRODUCTION POSSIBILITIES CURVE
d. Which point on the curve is the most desired one?
Potential Output
Combinations Homeless Shelters Hospitals
A 12 0
Chapter 2, Problem 2 (pg 48)
2. Suppose the following data describe output in two different years:
a. Compute nominal GDP in each year.
b. By what percentage did nominal GDP increase between Year 1 and Year 2?
c. Now compute real GDP in Year 2 by using the prices of Year 1.
d. By what percentage did real GDP increase between Year 1 and Year 2?
Item Year 1 Year 2
Apples 20,000 @ 25¢ each 30,000 @ 30¢ each
Bicycles 700 @ $800 each 650 @ $900 each
Movie rentals 10,000 @ $1.00 each 12,000 @ $1.50 each
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