1. The night before an economics test, you decide to go to the movies instead of staying home and studying.You get 50 percent on your test compared with the 70 percent that you normally score.

a. Did you face a trade-off?

b. What was the opportunity cost of your evening at the movies?

1. Using the table below draw the production possibility frontier for capital goods and consumer goods. (Hint: plot Capital goods y-axis)

Possibility

Consumer goods (millions)

Capital goods millions)

A

0

10

B

2

8

C

4

6

D

6

4

E

8

2

F

10

0

b) Calculate the per unit opportunity cost of moving from point C to D.

c) Plot a point outside the PPF and explain how it can be achieved.

1. Andrew, Stuart and Chris are planning to travel from Melbourne to Sydney. The plane trip to Sydney takes an hour, while the train trip takes 13 hours. The air fare is $200 and the train fare is $80. They all have to take time off from work while traveling. Andrew earns $5 an hour in his job, Stuart $10 an hour and Chris $12 an hour.

Calculate the opportunity cost of air and train travel for each person.How should each of them travel to Sydney? What other factors might be taken into account.