S.
Klepper, Economics
73-100, Fall 2008
Consider a country that produces two goods, food and shelter. Suppose both goods are produced using only labor, the only productive resource of the country. Assume there are a total of 200 units of labor to produce food and shelter. Suppose that one unit of labor is required to produce each unit of food. One unit of labor is also required to produce the first unit of shelter, but as additional units of shelter are produced, the production of each additional unit requires a greater amount of labor than the prior unit.
Which
of the following statements concerning this situation are correct? Mark true for a correct answer and false for
an incorrect one and provide explanations for each of your answers.
_____1. The maximum number of units
of shelter the country can produce is less than 200.
_____2. As more units of food are produced, the opportunity cost of food does not change.
_____3. The opportunity cost of each unit of food is one unit of shelter.
_____4. The production possibilities curve of the country is concave shaped.
_____5. As more units of shelter
are produced, the opportunity cost of successive units of shelter increases.