Draw a Production Possibilities Curve That Indicates How You Might

question 19

Essay

Draw a production possibilities curve that indicates how you might divide up 10 hours of study time between your economics and accounting midterm exams. Put expected grade in economics on the horizontal axis and expected grade in accounting on the vertical axis. If you don't study at all, you expect to make a 70 on both exams. For every one additional hour of studying economics, your exam grade rises by 3 points. The same is true for accounting.
a. What is the opportunity cost of studying one extra hour for your economics exam?
b. What is the opportunity cost of studying one extra hour for your accounting exam?
c. Can the production possibility curve shift? Explain.

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Definitions:

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource, assuming other factors remain constant.

Wage Rate

The standard amount of compensation that employees receive in exchange for performing a specific task or job per time period.

Substitution Effect

The adjustment in purchasing behaviors as a result of variations in the comparative costs of products, prompting buyers to switch from one item to another that is either cheaper or more costly.

Output Effect

The impact on economic output and productivity resulting from a change in the level of economic activity.