1.
Spark R&D is a Bozeman-based splitboard binding company. In one month, Spark R&D’s employees can produce a maximum of 40 bindings or 60 Crampons. For the following problem, assume constant opportunity costs. a.
Draw Spark R&D’s Production Possibilities Frontier for output per month below. Be sure to label your axes. b.
Label the attainable, efficient, and unattainable areas of your graph
2.
Identify whether each of the following statements is positive or normative? a.
Comparative advantage is the ability to produce at a lower opportunity cost b.
My Peer Leader is the most handsome student at MSU c.
Marginal cost is the additional or incremental cost associated with a choice d.
Montana’s state bird is the Western Meadowlark e.
The price of beef in Montana should be raised to help cattle ranchers

3.
Suppose the University of Montana and Montana State University can produce NFL players or
Doctors:
University Production Possibilities Per Year
Montanan State University 30 Doctors or 10 NFL Players
University of Montana 16 Doctors or 4 NFL Players a.
Which school has absolute advantage in producing Doctors? NFL Players? b.
For MSU, what is the opportunity cost of a Doctor? Of an NFL Player? c.
For the University of Montana, what is the opportunity cost of a Doctor? Of an NFL
Player? d.
If the two universities decide to specialize in production, who should produce
Doctors? NFL Players? e.
If the two universities were to trade, what would be the price range NFL Players could be sold and bought for? Price range for Doctors?

4.
Basic Batch Industries can produce 500 Pumpkin Spice Lattes or 1,000 Juice Cleanses in a day.
Below is their PPF.
600
500
400
300
200
100
0
0 200 400 600
Juice Cleanses/day
800 1000 1200 a.
If the market is operating efficiently and producing 200 Lattes, how many Juice Cleanses are produced? b.
If the market is operating efficiently and producing 800 Juice Cleanses, how many Lattes are produced? c.
Suppose Basic Batch Industries purchases a new Expresso Machine that can produce
600 Lattes/day. Ceteris Paribus, sketch the new PPF d.
What factors would influence Basic Batch Industries’ decision on how many Pumpkin
Spice Lattes and Juice Cleanses to produce? Explain.
5.
In 2010, Haiti experienced a 7.0 magnitude earthquake, one of the century’s worst natural disasters. What impact would this have on the country’s PPF?