Q1. Many small boats are made of fiberglass that is derived from crude oil. Suppose that the price of oil rises.
a. Using diagrams show what happens to the cost curves of an individual boat-making firm and to the market supply curve.
b. What happens to the profits of boat makers in short run? Illustrate what happens to the number of boat makers in the long run?
Q2. Explain how the production possibility curves can be used to analyze the fundamental economic challenges of scarcity, choice and opportunity cost. Choose two products and with the aid of graphs.