Assignment # 1 Deadline of Submission: February 03, 2015

Question: 1| Inhabitants of Rangpur can grow potatoes and catch fish in respective combination-

a) Draw a PPF with potatoes on the horizontal axis and fish on vertical axis illustrating

combinations (A-F)

b) Can inhabitants of Rangpur produce 500 pounds of fish and 800 pounds of potatoes,

explain?

c) What is the opportunity cost of increasing the annual output of potatoes from 600 to 800

pounds?

d) What is the opportunity cost of increasing the annual output of potatoes from 200 to 400

pounds?

e) Explain why the answers to parts (c ) and (d) are not the same? What does this imply

about the slope of the PPF? (Hints: Different slope means different opportunity cost)

Combinations Quantity of potatoes (in pound) Quantity of Fish (in Pound) A 1000 0 B 800 300 C 600 500 D 400 600 E 200 650 F 0 675

Question: 2| Production trade-off for Company T is:

Possibilities Butter (in pounds) Guns (in pounds) A 0 15 B 1 14 C 2 12 D 3 9 E 4 5 F 5 0 I 4 9 U 2 6

a) Explain the efficient trade-offs for Company T after drawing a PPF with Butter on the

horizontal axis and Guns on vertical axis?

b) Explain why point I is unattainable and U is inefficient?

c) With technological improvement can possibility (I) be efficient trade-off for company T?

(Hints: Show the shift of the curve and explain why)

Question: 3|

USA JAPAN

Computer 10 6

Car 5 8

(Set, computer on Y-axis and car on X-axis for both countries)

a) Is there any country enjoy absolute advantage? Explain why?

b) Which country has comparative advantage on producing computer?

c) Which country has comparative advantage on producing car?

d) Fill up the blanks of table below:

Opportunity cost of USA

Opportunity cost of JAPAN

Computer

Car

---------------Estiaque Bari