1) Consider the markets for DVDs, TV screens, and tickets at movie theaters.

a. For each pair, identify whether they are complements or substitutes:

• DVDs and TV screens
• DVDs and movie tickets
• TV screens and movie tickets

1. Suppose a technological advance reduces the cost of manufacturing TV screens. Draw a diagram to show what happens in the market for TV screens.
2. Draw two more diagrams to show how the change in the market for TV screens affects the markets for DVDs and movie tickets.

2) Suppose that there are 10 million workers in Canada and that each of these workers can produce either 2 cars or 30 bushels of wheat in a year.

1. What is the opportunity cost of producing a car in Canada? What is the opportunity cost of producing a bushel of wheat in Canada? Explain the relationship between the opportunity costs of the two goods.
2. Draw Canada's production possibilities frontier. If Canada chooses to consume 10 million cars, how much wheat can it consume without trade?

Label this point on the production possibilities frontier.