1. One-Question IQ Test There is a deaf-mute who wants to buy a toothbrush. By imitating the action of brushing one's teeth, he successfully expresses himself to the shopkeeper and the purchase is done. Now, if there is a blind man who wishes to buy a pair of sunglasses, how should he express himself? Essential Terms: Production Possibilities Curve, Production Possibilities Frontier, efficiency, underutilization, law of increasing costs

4. Decisions at the Margin “How much?” instead of “What? “How much?” instead of “What? Satisfaction with individual unit decreases as additional units are added Satisfaction with individual unit decreases as additional units are added Productivity of individual unit decreases as additional units are added Productivity of individual unit decreases as additional units are added Law of diminishing returns Law of diminishing returns

8. Underutilization

10. Law of Increasing Costs =10 ____ 30 =10 ____ 30 OreGrain 30

11. =10 =5 ____ 35 =10 ____ 20 OreGrain 30 3520

12. =10 ____ 20 =5 =10 ____ 35 OreGrain 2035 30 3520

14. GunsButter 015 814 12 189 205 210 Graph the following Production Possibilities Curve:

16. Now, insert a point showing underutilization.

17. * Underutilization

18. GunsButter 217 1016 1614 2011 227 232 After technological improvements, here is the new Production Possibilities Data. Graph this on the old chart.

22. 1.Use the data above to construct a Production Possibilities Curve. Be sure to label your graph. 2. Mattel produces only 3 million Kens and 5 million Barbies. Plot this point on the graph above. 3.What does this new point represent (in relation to the original line.) KensBarbies 19 37 55 73 91

24. The next year, Mattel invests in new equipment. The table below represents the new combinations of Kens and Barbies that it could produce. Use this data to construct a new Production Possibilities Curve on the same grid. What does this new line represent (in relation to the old) KensBarbies 102 84 66 48 210