2) Draw the graph of a production function which requires only one input. Suppose the decision-maker is on a budget which either can be spent on that input or on a different consumption good which can be purchased at a fixed price. Draw his possibility frontier (FF). What is the slope of the FF called and what trade-off does it refer to? Explain the condition that needs to be satisfied for him to have made a wise decision.

2) Draw the graph of a production function which requires only one input. Suppose the decision-maker is on a budget which either can be spent on that input or on a different consumption good which can be purchased at a fixed price. Draw his possibility frontier (FF). What is the slope of the FF called and what trade-off does it refer to? Explain the condition that needs to be satisfied for him to have made a wise decision.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 1PA

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