Question

The concept of Opportunity Cost, and Production Possibilities is introduced in Chapter 1. Select one of the following questions to answer: You do not have to do all of the below select but be sure to pick and answer one of them and discuss the economic concept involved as support of your answer where possible. QuestionI How might a nation's production possibilities be affected by the following? 1. New solar technology 2. An increase in immigration 3. An increase in military spending. 4. An increase in college tuition. or Question II. How much time could you spend on homework in a day? How much do you spend? How do you decide?

Answer 1

For Ques 1:
Solar Tech, Immigration will shift the PPC outward as it will lead to higher production capacity as the nation is able to produce more uisng the same amount of resoruces.

Increasing Military Spending and college tuition will shift PPC inwards as these will divert the resources from productive uses to these uses. Thus, more resources will have to be spent to maintain the same level of college tuition and same level of defence capability.

2: Decision between Time spent on Homework and Play is decided by the amount of homework and the difference of utility obtained by going out to play and doing the homework. The utility obtained by doing homework diminishes as we do more homework and so on..

3. North Korea's missile program and its hunger problems require resources, and one often comes at the cost of the other. Therefore, NK may choose to spend more on its missiles, thus diverting resources from its Hunger program or vice versa.

4. My argument for this problem would be that Giving additional day offs, shorter work weeks or overtime payments would increase the cost of labour in the economy. As a result, many MNC's tend to outsource or shift their labour intensive functions to countries where the cost of labour is low. Hence, there is a trade-off between working hours and cost of labour.  One can argue otherwise as well

Let me know if any queries.