1. A municipal government has a yearly budget of $80 million. The municipality must spend $1 million a year to hire and equip a police officer; it must spend $250 thousand a year on a schoolteacher. Assume the municipality does not spend its budget on anything else. Just cops & teachers. The police officer's job is to arrest the criminals, and a single police officer makes 10 arrests per year. The teacher's job is to teach, and a single teacher instructs 40 students a year.

a. Draw the municipality's production possibilities boundary, placing the number of arrests on the vertical axis & the number of the students on the horizontal axis. Make sure to show the axis intercept points. (1)

b. What is the opportunity cost of arresting a criminal? Give the number (and units of measurement) & explain. (2)

c. A new app improves a police officer ability to find the criminals. As a result, a police officer now makes 20 arrests per year, other things equal.

d. What is the new opportunity cost of arresting a criminal? Give the number (and units of measurement) & explain. (1)

e. What happens to the production possibilities boundary? Explain. (1)