Answered step by step
Verified Expert Solution
Question
1 Approved Answer
2. Suppose that you open a bar that serves two types of mixed drinks, bammers and slammers. A bammer consists of two shots of
2. Suppose that you open a bar that serves two types of mixed drinks, bammers and slammers. A bammer consists of two shots of vodka and one shot of rum, and a slammer consists of one shot of vodka and two shots of rum. You currently have 60 shots of vodka and 60 shots of rum at the bar. a. Draw your PPC for bammers (B) and slammers (S). Put bammers (B) on the vertical axis. (HINT: To derive the PPC, it is easiest to start with a table to keep track of the resources being used. For example, if 0 slammers are produced and all resources are devoted to bammers, how many bammers can be produced? That point is the vertical intercept for the PPC. Next. ask what happens if 5 less bammers are produced? 10 less, etc.? From the table, you can derive the points that make up the PPC graph. What limits the PPC are the quantities of vodka and rum.) b. What can be said about the utilization of resources when 20 bammers and 20 slammers are produced? c. How would you characterize the allocation of 10 bammers and 10 slammers? What about 30 bammers and 30 slammers? d. What is the opportunity cost of the first 5 bammers produced? What is the opportunity cost of the last 5 bammers produced?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
a To draw the Production Possibility Curve PPC for bammers B and slammers S we can start with a table to keep track of the resources being used Lets a...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started