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1. John and Paul are stranded on a deserted island where they survive by catching fish and picking coconuts. In one day John can catch 8 fish OR pick 12 coconuts or he can divide his time between the two in any way with no loss of efficiency. So for instance, if he spends half of the day catching fish and half picking coconuts, he can catch 4 fish AND 6 coconuts. Similarly, Paul can catch 6 fish or pick 3 coconuts in a day (and also divide time in any way between the two).

Draw a PPF for John and Paul. Label the slopes and intercepts. If they want to produce 4 fish between the two of them, what quantity of coconuts would be production efficient? label this point on your graph.

2. a. Show the market for potatoes on a graph and show what will happen if there is a drought in Idaho (where a lot of potatoes are grown).

b. On another graph, show what will happen in the market for potatoes if there is a drought in China (where, I presume, a lot of rice is grown).

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