Assignment # 1

Deadline of Submission: February 03, 2015

Question: 1| Inhabitants of Rangpur can grow potatoes and catch fish in respective
combinationCombinations
A
B
C
D
E
F

Quantity of potatoes (in pound)

1000
800
600
400
200
0

Quantity of Fish (in Pound)

0
300
500
600
650
675

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)

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

Possibilities
A
B
C
D
E
F
I
U

Butter (in pounds)

0
1
2
3
4
5
4
2

Guns (in pounds)

15
14
12
9
5
0
9
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
Computer
Car

10
5

JAPAN
6
8

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

a)
b)
c)
d)

Is there any country enjoy absolute advantage? Explain why?

Which country has comparative advantage on producing computer?
Which country has comparative advantage on producing car?
Fill up the blanks of table below:
Opportunity
cost of USA

Opportunity cost
of JAPAN

Computer
Car

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