Question

Zarnaab is studying for exams in economics and political science. She can read 40
pages of economics and 30 pages of political science textbook in one hour. If she
reads 30 pages of economics, then she can read 60 pages of the political science
textbook in one hour.
1a. What is Zarnaab’s opportunity cost of reading an extra page of the economics
textbook? [3 points]
1b. Treating number of pages of economics textbook as x1"and number of pages of
political science textbook as x2, write down the set of all possible combinations of
the two textbooks she can possibly read in one hour. [5 points]
1c. Suppose she learns that after reading 25 pages of the economics textbook her
speed doubles. Draw a graph showing her new choice set. Make sure to label all
important features of the graph. [10 points]

Answer 1

1 a . Opportunity cost is the cost of next best alternative foregone. From the given example (i)  Zarnaab can read 40 pages of economics and 30 pages of political science in one hour. (ii) Zarnaab can read 30 pages of economics and 60 pages of political science in one hour

So in this case the ooportunity cost of reading the pages is the cost of next best alternative .i.e (ii) 30 pages of economics and 60 pages of political science.

1 b. Production possibility frontier refers to graphical representation of possible combinations of two goods that can be produced with given resources and technology. Assumption for PPF : 1. The amount of resources in an economy is fixed , but these resources can be transferred from one use to another. 2. With help of given resources , only two goods can be produced. 3. The resources are fully and efficiently utilised.

Economics	Political science	MOC
40	60	2:3
30	120	1:4

Assuming that economics pages= 1x and political science pages =2x i.e. 40 x 1 = 40 and 30 × 1= 30 30×2=60 and 60×2 = 120

To calculate MOC the formula is the number of units of a commodity sacrigiced to gain one additional unit of another commodity. I.e. 40÷60 = 2:3 and 30 ÷120 = 1:4