1. A small economy has a given amount of land, labor (25 000 workers) and capital (machinery and tools). Suppose that an economy produces only two goods during the Pandemic: Vaccines (Va) and Vitamins (Vi). Below is a table that shows the production possibilities faced by the economy:

Allocation.............................Vaccines (per week).....................Vitamins (bottles per week)

A 0 75

B 10 70

C 20 60

D 30 45

E 40 25

F 50 0

Questions:

1-Use the table above to produce a diagram of the economy's production possibilities frontier (PPF) for Vaccines and Vitamins. Label Vaccines on the X-axis and Vitamins on Y-axis.

2-If all resources were allocated to the production of Vaccines, how many could be produced? If all resources were allocated to the production of Vitamins, how many could be produced. Label the Specialization Points on the diagram.

3-List the four assumptions associated with the PPF model

4-Calculate the opportunity cost of...

a-Increasing the output of Vaccines from 20 to 30 per week

b-Increasing the output of Vaccines from 40 to 50 per week

c-Increasing vitamin production from 25 to 45 per week

d-Increasing vitamin production from 70 to 75 per week

5-What is meant by the Law of Increasing Opportunity Cost? Use the table above to illustrate this Law...

6-Explain how each of the following will affect the PPF you drew in part (a)...

a-There is an increase in labor due to an increase in immigration (all else equal)

b-A new technological method allows vaccines to be produced more quickly (all else equal)