Below is a production possibilities table for capital goods and consumer goods. GOODS PRODUCED PRODUCTION ALTERNATIVES А в с DE Capital goods (in thousands) Consumer goods (in hundreds thousands) 3 12 40 36 28 16 a. Plot the data in the graph on the next page placing: Capital goods on the horizontal axis and • Consumer goods on the vertical axis. b. What are the four assumptions on which the production possibilities frontier is based? Calculate OC = [amount you give up / amount you get] c. If the economy is at point C, what is the cost of one more unit of capital good? d. If the economy is at point D, what is the cost of one more unit of capital good? e. Ifthe economy is at point D, what is the cost of one more unit of consumer good? f. If the economy is at point C, what is the cost of one more unit of consumer good?

Below is a production possibilities table for capital goods and consumer goods. GOODS PRODUCED PRODUCTION ALTERNATIVES А в с DE Capital goods (in thousands) Consumer goods (in hundreds thousands) 3 12 40 36 28 16 a. Plot the data in the graph on the next page placing: Capital goods on the horizontal axis and • Consumer goods on the vertical axis. b. What are the four assumptions on which the production possibilities frontier is based? Calculate OC = [amount you give up / amount you get] c. If the economy is at point C, what is the cost of one more unit of capital good? d. If the economy is at point D, what is the cost of one more unit of capital good? e. Ifthe economy is at point D, what is the cost of one more unit of consumer good? f. If the economy is at point C, what is the cost of one more unit of consumer good?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.3P

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Similar questions

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Review the numbers for Canada and Venezuela from Table 33.12 which describes how many barrels of oil and tons of lumber the workers can produce. Use these numbers to answer the rest of this question. Draw a production possibilities frontier for each country. Assume there are 100 workers in each country. Canadians and Venezuelans desire both oil and lumber. Canadians want at least 2,000 tons of lumber. Mark a point on their production possibilities where they can get at least 3,000 tons. Assume that the Canadians specialize completely because they figured out they have a comparative advantage in lumber. They are willing to give up 1,000 tons of lumber. How much oil should they ask for in return for this lumber to be as well off as they were with no trade? How much should they ask for if they want to gain from trading with Venezuela? Note: We can think of this ask as the relative price or trade price of lumber. Is the Canadian ask you identified in (b) also beneficial for Venezuelans? Use the production possibilities frontier graph for Venezuela to show that Venezuelans can gain from trade.