Any answer without clear and precise explanation will not receive any credit.
1.Betty can make either “120 bottles of wine and 0 boxes of chocolates” or “0 bottles of wine and 960 boxes of chocolates” or a combination of wine and chocolates. For parts (a) through (c) of this question assume that Betty’s Production Possibility Frontier (PPF) reflects the property of constant opportunity costs.
a. [10 points] Draw Betty’s PPF.
b. [10 points] Find Betty’s opportunity cost of a bottle of wine in terms of box (es) of chocolates.
2.c. [10 points] Suppose Betty takes a course called WINE 103. After the semester is over she realizes that she can now make either “288 bottles of wine and 0 boxes of chocolates” or “0 bottles of wine and 960 boxes of chocolates” or a combination of wine and chocolates. Find Betty’s new opportunity cost of a box of chocolate in terms of bottle(s) of wine.
3.[20 points] Find the equilibrium price, quantity and revenue in a market characterized by the following information:
Demand: Qd = 500 – 2P Supply: Qs = 3P