1. (15 points) The production possible below shows the various combin

1. (15 points) The production possible below shows the various combination d combinations of e higher education (HE) and all other goods (AO) that the economy is d all other goods (AO) that the economy is capable of producing during year, holding productive resources and technology constant. The economy is currency operating at point A producing HE, of higher education and AOA of all other goods. Au A HE HE HEB a. Now suppose that a bill is passed in the House and Senate that grants free higher education to anyone who wants it at community colleges and state supported colleges and universities. As a result the enrollment in higher education increases from HEA to HE Show and explain what will happen, and why, to the output of all other goods, assuming that resources and technology remain constant. b. Using the above analysis, explain why higher education is not free both from the students perspective and from the economys perspective. C. Now suppose that enrollment in higher education increases to the extent that it results in a significant decrease in the labor force. Show and explain what will happen to the production possibilities curve during the current period of time.

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