HW 2 Essay

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University of XXXBUS 500B Fall 2014
Homework 2.2
Due Date: Sunday 09/28
Instructor: KittiTrade
1.
Nation A’s production in 1 day Nation B’s production in 1 day
Computers 100
Software 140 Computers 120
Software 150
Two nations can produce computers and software in the amounts given in the table above.
Using the same amount of resources to produce two goods. Draw PPF curve and explain the reason of each question.
a. Does either nation have an absolute advantage in producing the products?
b. Which nation has a comparative advantage in computers?
c. Which nation has a comparative advantage in software?
2. Assume some guy named Spano and a woman named Bagley are stranded on an island. Two tasks must be
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Label these points B. (Look at the case of US and Japan’s export and import). (Each country will export what it specializes and import what it does not specialize)
Firms in Competitive markets
4.

Brennan's Farm produces and sells milk. The market for milk is perfectly competitive. The market price of milk is $2.50 per gallon. The relationship between the farm's output and total costs is shown in the table above.
a) Draw Brennan's average total, marginal revenue and marginal cost curves. (Hints: calculate total revenue (P* times Q) first, and then calculate MR)
Use your graphs to find Brennan's profit-maximizing output. (Hints: where MC=MR, you can estimate the level of output if not given specific number)
If Brennan maximizes his profit, how much profit does he make? (ATC=2.13)
d) Should Brennan stay in business? Will other farms with costs the same as Brennan's enter the milk market? Explain.
Monopoly
5.

What are Adele's profit-maximizing output and price? What is Adele's economic profit? Explain your answer.
b) Does Adele's Springs use resources efficiently? Explain your answer
c) What is the deadweight loss due to profit-maximizing monopoly pricing under the following condition.
6. Trade Restriction

a. What is the equilibrium price of CDs before trade? _________________
b. What is the equilibrium quantity of CDs before

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