.1 An economy has 100 identical workers. Each one can produce four cakes or three shirts, regardless of the number of other individuals producing each good.

2.How many cakes can be produced in this economy when all the workers are cooking? 3. How many shirts can be produced in this economy when all the workers are sewing?

4. On a diagram with cakes on the vertical axis, and shirts on the horizontal axis, join these points with a straight line to form the PPF.

5. Label the inefficient and unattainable regions on the diagram.

6.Using the PPF that you have graphed using the data in Exercise 1.2, determine if the following combinations are attainable or not: (X = 3000,Y = 720), (X = 4800,Y = 480). 7.You and your partner are highly efficient people. You can earn $20 per hour in the workplace; your partner can earn $30 per hour.

8. What is the opportunity cost of one hour of leisure for you?

9. What is the opportunity cost of one hour of leisure for your partner?

10. Now consider what a PPF would look like: You can produce/consume two things, leisure and income. Since income buys things you can think of the PPF as having these two 'products' - leisure and consumption goods/services. So, with leisure on the horizontal axis and income in dollars is on the vertical axis, plot your PPF. You can assume that you have 12 hours per day to allocate to either leisure or income. [Hint: the leisure axis will have an intercept of 12 hours. The income intercept will have a dollar value corresponding to where all hours are devoted to work.

11.Draw the PPF for your partner.

12.where each of 100 workers can produce either four cakes or three shirts, suppose a recession reduces demand for the outputs to 220 cakes and 129 shirts.

13.Plot this combination of outputs in the diagram that also shows the PPF.

14. How many workers are needed to produce this output of cakes and shirts?

15.What percentage of the 100 worker labour force is unemployed?r