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Suppose the production possibility frontier for guns x and butter y is given by x2 2y2 900. a. Graph this frontier b If individuals always prefer consumption bundles in which

Suppose the production possibility frontier for guns (x) and butter (y) is given by

x2+ 2y2= 900.

a. Graph this frontier

b. If individuals always prefer consumption bundles in which y = 2x, how much x and y will be produced?

c. At the point described in part (b), what will be the RPT and hence what price ratio will cause production to take place at that point? (This slope should be approximated by considering small changes in x and y around the optimal point.)

d. Show your solution on the figure from part (a).

Jun 04 2020 View more View Less

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