Homework Answers
1. In case of constant opportunity cost the Production Possibility frontier will be straight line. Since, the opportunity cost of producing an additional unit of other good. Hence A straight line.
While in case of increasing opportunity cost the PPF will be bowed out. Kindly refer the attached picture below
On one of the axis we have Tomatoes and another Cereals.
2. Nominal GDP = Price of tomato×Quantity of tomato+Price of cereal × Quantity of Cereal
Nominal GDP
Nominal GDP (a) = 5*20 + 1*15 = $ 115
Nominal GDP(b) = 10*20 + 2*15 = $ 230
Nominal GDP(c) = 4*40 + 8*12 = $ 256
Nominal GDP(d) = 4*60 + 8*18 = $ 384
The price line can be determined as follows
First assume 0 unit of tomato is consumed then consumption of cereal = $ 256 /$ 8 = 32 units
When Cereal consumed is zero, then tomato consumed will be equal to $ 256/$4 = 64 units
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