WORKSHEET #1

Short Answer:

1. Draw a production possibilities frontier representing the economy’s possible production of milk and
eggs. Write a justification as to why you chose an increasing opportunity cost or a constant opportunity
cost. __________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
Now, show what will happen to the frontier or the production point under each of the following
circumstances. Use a separate graph to illustrate each situation.

a. The outcome for the economy is efficient, with society choosing approximately equal amounts of
milk and eggs.
b. A recession causes a significant percentage of the labor force to become unemployed.
c. Some cows are found to be infected with Mad Cow Disease, and many of the cows must be
destroyed.
d. Chickens are infected with a rare disease and egg-laying is reduced.
e. Improvements in animal nutrition raise the general productivity of cows and chickens.
f. The cow and chicken populations increase.
g. The Surgeon General announces that drinking milk prolongs life.

2. For the production possibilities frontier illustrated in the graph shown:

a. How would you measure the opportunity cost of obtaining more computers?
b. How does that opportunity cost change as society chooses to produce and consume more computers?
c. Why does the opportunity cost change that way?

Multiple Choice

3. The slope of a line is calculated by

a. change in y/change in x.
b. change in x/change in y.
c. x/y.
d. x + y.

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 4.

.
In the graph shown above, the slope of the curve between points A and B is
a. -2
b. -1/2
c. 1/2
d. 2

(Use the following table for questions 5-7.)

Production Possibilities for Tuneland

Cars Toys
50 0
40 250
30 450
20 600
10 700
0 750

5. The reference table shows the production possibilities for Tuneland. What is the opportunity cost to
Tuneland of increasing the production of cars from 30 to 40?
a. 200 toys
b. 250 toys
c. 450 toys
d. It is impossible to tell what the opportunity cost is without knowing production costs for cars and
toys.

6. In the table showing the production possibilities for Tuneland, what is the opportunity cost of
increasing the production of toys from 450 to 600?
a. 30 cars
b. 20 cars
c. 10 cars
d. It is impossible to tell what the opportunity cost is without knowing production costs for cars and
toys.

7. Based on the table showing the production possibilities for Tuneland, what is the most accurate
statement about the opportunity cost of producing an additional 10 cars in Tuneland?
a. The opportunity cost of an additional 10 cars is 100 toys.
b. The opportunity cost of an additional 10 cars is 200 toys.
c. It is impossible to determine the opportunity cost of an additional 10 cars.
d. The opportunity cost of an additional 10 cars increases as more cars are produced.

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 (Use this graph for questions 8-10)

8. On the production possibilities frontier shown, the opportunity cost to the economy of getting 10
additional roller blades by moving from point A to point B is
a. 15 bikes.
b. 10 bikes.
c. 5 bikes.
d. It is impossible to know the opportunity cost without knowing the cost of the resources used to
produce the additional roller blades.

9. On the production possibilities frontier shown, the opportunity cost of getting 5 additional bikes by
moving from point A to point C is
a. 15 roller blades.
b. 10 roller blades.
c. 5 roller blades.
d. It is impossible for the economy to move from point A to point C.

0. On the production possibilities frontier shown, the opportunity cost of getting 20 additional roller
blades by moving from point D to point A is
a. 15 bikes.
b. 10 bikes.
c. 5 bikes.
d. 0.

1. 11. Use the chart to create a production possibilities curve showing the time you can spend either
working or playing. The other 12 hours in the day are committed to sleeping and family time, so
you cannot make choices to use them in your day. Place Play on vertical axis and Work on the
horizontal axis.

A B C D E
Work 0 3 6 9 12
Play 12 9 6 3 0

A. Assume you decide to spend all of your time playing. What is the opportunity cost of your
decision? Explain.
B. The next day, you decide to only spend 6 hours playing. What is the opportunity cost of your
decision? Explain.
C. Now you decide you want to work 8 hours and play 8 hours. Plot the point on your graph and label
it point F. How will this schedule impact your life?

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 D. What if you decided to spend 6 hours playing and 4 hours working? Plot this point on your graph
and label it point G. How will this schedule impact your life?

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