1. Name the two variables of these of these quantity of corn in tons/yr.
hypothetical production possibilities curves point A
a. US Production Possibilities curve
b. ______________________________
Maximum quantity of cars producible
2.Determine the Opportunity Cost for 80 million tons
point B
firms in the US of producing more cars along
their Production Possibilities Curve between point M
Point A and point B. Then determin 40 million tons
the Opportunity Costs for firms in the US of point N
of producing more corn along their Korea’s production possibilities curve
Production Possibilities Curve between
between Point B and point A. 0 4 million cars 8 million cars
quantity of cars/yr.
a. The Opportunity Cost for firms in the US of producing more cars can be written mathematically as:
OC = Not producing 30 m tons of corn/yr.
cars
Extra 4 million cars /yr.
b. The Opportunity Cost for firms in the US of producing more corn can be written mathematically as:
OC = Not producing
corn
Extra 30 million tons of corn/yr.
3. Now determine the Opportunity Costs for firms in KOREA of producing CARS and CORN along their Production
Possibilities Curve between point M and point N and from point N to Point M
a. The Opportunity Cost for firms in Korea of producing more cars can be written mathematically as:
Not producing
OC cars = Not producing 20 m tons of corn/yr.
Extra 5 million car/yr.
b. The Opportunity Costs for firms in Korea of producing more corns can be written mathematically as:
Not producing
OC corn =
Extra 20 million tons of corn/yr.
4. Now Compare Opportunity Costs of producing more cars in the US [ see question 2a] with Opportunity Cost of
producing more cars in Korea [see question 3a], then state which firms are the low Opportunity Cost producer of
cars: they are the firms in
5. compare the Opportunity Costs of producing more corn in the US [see question 2b] with the Opportunity cost of
producing more corn in Korea [see3b] and determine which firms are the low Opportunity Cost producer of corn: they
are the firms in
6. Now assume the firms in the two economies recognize who are the low Opportunity Cost producer of cars and the low
opportunity cost and choose to specialize the in production of the product they are the lo question w Opportunity Cost
producer of. Now determine the change in the quantity of these two products produced as firms in the US and Italy
choose to produce more of the product they are the low opportunity cost producer of and less of the product they the high
opportunity cost producer of : Fill in the table to answer this question using the Opportunity costs determined in question
2 and 3. where (+) means producing more and (– ) means producing less. In the first row write what the firms in the US
are doing and in the second row write what the firm in Italy are doing and in the last row write the net change in the
production of cars and corn.
quantity of cars quantity of corn
firms in the US producing more of the product of
the product that they are the low opportunity cost
producer of and less of the product they are the
high opportunity cost producer of.
firms in Korea producing more of the product
that they are the low opportunity cost and less of
product they are the high Opportunity cost
producer of.
the net change in the quantities of these products
produced because these firms are engaged in
proper specialization
7. List the 4 categories of the essential resources that must exist if products are to be produced (category is not a specific
resource) (This is covered in module 1)
a. b.
c. d. Entrepreneurial Ability
8. What are some of the expected consequences of resources being scarce (this is covered in module 1)
a. The products produced from those scarce resources will also be scarce
b.
c.
9.What must the Government do to assure resources are allocated to producing products where Opportunity cost of a
products is low away from producing a product where Opportunity costs are high.
10. In Free economy who are the owners of the right to use most of the resources that exist.
