S.
Klepper, Economics
73-100, Fall 2009
If
originally two units of labor were required to produce each unit of each good,
then the opportunity cost of each unit of food was one unit of shelter and vice
versa. Consequently, the production
possibilities curve was a straight line. After the innovation, one unit of
labor was required to produce each unit of food. The transfer of unit of labor from the
production of shelter would reduce the production of shelter by .5 units. Consequently, the opportunity cost of each
unit of food after the innovation was .5 units of shelter. Similarly, after the innovation the
opportunity cost of each unit of shelter was two units of food. Therefore, the production possibilities curve
was also a straight line after the innovation.
If all 200 units of labor were devoted to food production, then the
country could produce a maximum of 100 units of food before the innovation and
200 units of food after the innovation, causing the maximum number of units of
food it could produce to double.
Based
on this description, the answers to the individual questions are:
_____1.
True
_____2. True
_____3.
True
_____4. False
_____5. True