1. Suppose that you must allocate your time between studying economics and studying physics. The percentage of time you spend studying economics and the grades you will get on the two exams are as follows:
   
   

   Percent of Time Studying Economics	Economics Grade	Physics Grade
   100	80	0
   80	75	30
   60	65	50
   40	50	65
   20	30	75
   0	0	80

   Draw the production possibilities curve. How does this example illustrate increasing opportunity costs?
   
   Answer
   
   The production possibilities curve is drawn in Figure 1.5. The example illustrates increasing opportunity costs because, as you move down the table or the curve, each additional point on your physics grade comes at a cost of more and more points on your economics grade.
   
   

   Figure 1.5

   
   
2. Now suppose that, by using the study guide for economics, you are able to improve your choices as follows:
   
   

   Percent of Time Studying Economics	Economics Grade	Physics Grade
   100	100	0
   80	95	30
   60	85	50
   40	70	65
   20	40	75
   0	0	80

   1. Draw the new production possibilities curve, and describe how the new curve is related to the old curve.
      
      
   2. Characterize an economics grade of 70 and a physics grade of 65 under the original and the new production possibilities curves.
      
      
   Answers
   
   
   1. The new production possibilities curve, labeled "Study Guide," and the original curve are depicted in Figure 1.6. Using this study guide raises your economics grade at each percent of time, above zero, spent studying economics, but it does not help your physics grade. Although the new curve is above the original curve, it tilts out rather than shifting out.
      
      

      Figure 1.6

      
      
   2. An economics grade of 70 and a physics grade of 65 were impossible to attain with the original production possibilities curve, but this combination is now efficient.