Question

1.. Consider each of the following statements; is it TRUE or FALSE? You do not needto explain your answer.(15%)a) Jimmy is an elite athlete, and has a choice between three careers: he can join MajorLeague Baseball and make$1 million per year, he can join the National Hockey Leagueand make$2 million per year, or he can join the National Footbal League and make$2 million per year. Assuming he only cares about monetary compensation, Jimmy’sopportunity cost of playing in the NFL is$2 million per year.b) I have a choice between three activities on Friday night: drinking at the pub with myfriends, going bowling, or sitting at home and getting high. I hate getting high at home,but I enjoy the other two activities. Therefore, the opportunity cost of going bowlingfor me is the combined satisfaction I’d receive if I went to the pub with my friends, andgot high at home.c) The Production Possibilities Frontier shows the opportunity cost of producing onegood in terms of the other.d) Free trade is always good, since it leads to an increased standard of living and betterrelations between countries.e) The Production Possibilities Frontier is always concave (that is, curved outward)

Answer 1

Solutions a) FALSE <> opportunity cost of Toining NFL is the amo- of monetary compensation that Timmy will have to give up by not Joinin MLB and NHL. Hence, opportunity cost of Joining NFL is & m per year. my friends e) IRUE limited in order b) IRUE_ -> If i go for boo bowling. I have to with Sacrific going to the pub and I will miss sitting at home and getting high. » PPF Shows all the combinations of two goods that can be produced using the same amount of resources. Since the geources are more of one good, a higher quanlity of other good needs to be Sacrificed d) FALSE -> Although free trade has sev Several benefits Such Specite specilaised Production acess to Products lower per prices etc. How- ever .it Cannot be said that free trade is alw- ays goods good. As goods are imported from other Countries, this hurts domestic producers and comestic el to produce new more FALSE - PPF is concave to the origin when more and units of one good needs to sacrificed in order to produce one additional unit of a good. However ,PPF dan be convex when decreasing units of one good needs to Lucrificed in order to produces one additional unit of a good-