Homework 1 : Production Possibilities(Answer Key)In Mexico each unit of a resource can produce either one professional computer (withbusiness and scientific applications) or three computer-game systems. Mexico has100,000 units of this resource.A. Draw Mexico’s production possibilities curve for these two products.A. What is the opportunity cost of one professional computer? One computer-gamesystem? Is the production of professional computers subject to the law ofincreasing costs? Why or Why not?1) 3 computer-game systems.2) 1/3 professional computers.3) No. Constant opportunity costs.4) Trade-off always the same.B. Explain (verbally and graphically) how each of the following events will effect (or noteffect) Mexico’s production possibility curve.11) A previously idle plant that makes only computers is back in operation:Move out to curve from point beneath the curve.2) A new technique is discovered for producing computer-games with lessmaterials.Pivot out with respect to Computer-Game Systems axis.3) Because of a declining birthrate, the country’s working-age populationshrinks.PPF shifts in.4) Average educational attainment of the population increases by one year.PPF shifts
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