Question

A university produces two commodities: research and teaching. The resources the university uses include faculty and staff, libraries, classrooms, and so on. The following schedule indicates some points on the university’s PPF:


a. Does research production by the university exhibit increasing, constant or decreasing per- unit opportunity costs?
b. Graph the university’s PPF (assuming that straight- line segments connect the points specified above). Indicate which areas of the graph correspond to unattainable production points, production points that make the most effective use of the university’s resources, and points where there are unemployed resources.
c. Suppose that the university is at point B but would like to alter production to point C. What would be the per- teaching-unit opportunity cost of producing the extra teaching units?
d. Suppose that the university is at point C but would like to alter production to point B. What would be the per- research-unit opportunity cost of producing the extra research?
e. What will happen to the university’s PPF if the main laboratory burns down (assume that the laboratory is not used to produce teaching but is used solely to produce research)? Graph the new PPF.
f. What will happen to the PPF if all of the campus resources are cut in half? Graph the new PPF.
g. Suppose the university is at point F. The university president proposes to move the school to point B; she claims that B is a more desirable choice since the total output is 750 + 20 = 770 total units of output at B versus 150 + 150 = 300 output units at F. Is the presidentcorrect?


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  • CreatedNovember 14, 2014
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