Microeconomics. Assignment 1

1

MICROECONOMICS

 BCO

 115

 –

 Prof.

 Vasileios

 Myrthianos

Academic

 Year

 2014/15

 –

 Fall

 Semester

Assignment

 Unit

 1

Name

 and

 Surname:

1.

  Atlantis

 is

 a

 small,

 isolated

 island

 in

 the

 South

 Atlantic.

 The

 inhabitants

 grow

potatoes

 and

 catch

 fish.

 The

 accompanying

 table

 shows

 the

 maximum

 annual

output

 combinations

 of

 potatoes

 and

 fish

 that

 can

 be

 produced.

 Obviously,

 given

their

 limited

 resources

 and

 available

 technology,

 as

 they

 use

 more

 of

 their

resources

 for

 potato

 production,

 there

 are

 fewer

 resources

 available

 for

 catching

fish.

Maximum

 anual

 output

options

Quantity

 of

 potatoes

Quantity

 of

 fish

A

1000

0

B

800

300

C

600

500

D

400

600

E

200

650

F

0

675

a. Draw a production possibility frontier with potatoes on the horizontal axis

and fish on the vertical axis illustrating these options, showing points A–F.

2

MICROECONOMICS

 BCO

 115

 –

 Prof.

 Vasileios

 Myrthianos

!

b. Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes?

Explain. Where would this point lie relative to the production possibility

frontier?

No, it is impossible for Atlantis to produce this amount of goods. Because of

the limited resources and available technologies. As more they produce fish

as less they can produce potato.

c. What is the opportunity cost of increasing the annual output of potatoes

from 600 to 800 pounds and from 200 to 400?

In the first case by increasing the amount of potato we will lose 200 pounds

of fish. While in the second case we will lose approximately 50 pounds of

fish. So obviously the...