1. Explain why the enrollment in colleges and universities increases at times of economic recession. Make a distinction between explicit and implicit costs in your explanation
2. Use the following production possibilities table to draw the corresponding production possibilities curve (PPC) for a given economy.
|
Options
|
Food
|
Clothing
|
|
A
|
0
|
28
|
|
B
|
1
|
26
|
|
C
|
2
|
22
|
|
D
|
3
|
16
|
|
E
|
4
|
9
|
|
F
|
5
|
0
|
a) Find the opportunity cost of producing each unit of food in terms of clothing. Explain its pattern.
b) Assume we are currently producing 6 units of clothing and 4 units of food. Plot this point and interpret it economically.
c) What is the optimum production of output when food sells for $12 a unit and clothing for $3. Explain why you choose this point.