Refer to Scenario 4. Assume that the price of prison production falls to $1.5 million each. Draw the new production possibilities frontier. In addition, what is the new opportunity cost of producing one more prison? One more prison now costs one and one-half schools (10/6.66). Diff: 2 Skill: Analytical Topic: Opportunity cost AACSB: Refer to Scenario 4. Assume that the price of a prison falls to $1.5 million and that the price of school production rises to $2 million each. Draw the new production possibilities frontier. What is the new opportunity cost of producing one more prison? In the new situation, the opportunity cost of producing one more prison is three quarters of a school. Diff: 2 Analytical Topic: Opportunity cost AACSB: to Scenario 4. Assume that the state originally spent one-half of its budget on schools and one-half on prisons. What was the production of schools and prisons? Could the same number be achieved after the price of producing prisons falls to $1.5 million and the price of producing schools rises to $2 million? Explain. Production is five schools and two and one-half prisons. No, the same number of schools and prisons could not be built after the price of production changes. If the state continues to divide its budget equally, production would be two and one-half schools and three and one-third prisons. If the budget were juggled, the maximum number of schools that could be built is five, but no prisons could be built. And, if two and one-half prisons were built, there would be enough left in the budget to build just over three schools. Diff: 2 Skill: Analytical Topic: Production Possibilities Why does the opportunity cost of producing a good rise as more resources are devoted to producing that good?
Refer to Scenario 4. Assume that the price of prison production falls to $1.5 million each. Draw the new production possibilities frontier. In addition, what is the new opportunity cost of producing one more prison? One more prison now costs one and one-half schools (10/6.66). Diff: 2 Skill: Analytical Topic: Opportunity cost AACSB: Refer to Scenario 4. Assume that the price of a prison falls to $1.5 million and that the price of school production rises to $2 million each. Draw the new production possibilities frontier. What is the new opportunity cost of producing one more prison? In the new situation, the opportunity cost of producing one more prison is three quarters of a school. Diff: 2 Analytical Topic: Opportunity cost AACSB: to Scenario 4. Assume that the state originally spent one-half of its budget on schools and one-half on prisons. What was the production of schools and prisons? Could the same number be achieved after the price of producing prisons falls to $1.5 million and the price of producing schools rises to $2 million? Explain. Production is five schools and two and one-half prisons. No, the same number of schools and prisons could not be built after the price of production changes. If the state continues to divide its budget equally, production would be two and one-half schools and three and one-third prisons. If the budget were juggled, the maximum number of schools that could be built is five, but no prisons could be built. And, if two and one-half prisons were built, there would be enough left in the budget to build just over three schools. Diff: 2 Skill: Analytical Topic: Production Possibilities Why does the opportunity cost of producing a good rise as more resources are devoted to producing that good?
test-bank-principles-of-economics-10th-edition-case.docx