PRIN OF MICROECONOMICS
2nd Edition
ISBN: 9780393914085
Author: coppock
Publisher: Norton, W. W. & Company, Inc.
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Question
Chapter 19, Problem 1SP
(a):
To determine
(b):
To determine
Opportunity cost of producing meatballs in P and that of harvesting clams in P.
(c):
To determine
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Question 1: Germany and India only produce two goods. They have the same fixed resources,
are equally efficient, and both countries have constant opportunity costs between the two
goods. In one month, Germany can produce 200,000 automobiles or 60,000 hand-held
computers. India can produce 150,000 automobiles or 50,000 hand-held computers.
A. Graph the given information.
B. What is the opportunity cost for Germany to produce automobiles?
C. What is the opportunity cost for India to produce automobiles?
D. What is the opportunity cost for Germany to produce hand-held computers?
E. What is the opportunity cost for India to produce band-held computers?
F. Which nation has the absolute advantage in automobiles, which has the absolute
advantage in hand-held computers?
G. Which nation has the comparative advantage in automobiles, which has the
comparative advantage in hand-held computers?
H. Can these nations benefit from trade? Explain how. Be detailed, use numbers and
prove your answer.
Gary and Brenda both have similar businesses in the garment industry making caps and backpacks. In one day, Gary can make 60 caps and 12 backpacks when he divides his production resources equally between the two products. In one day, Brenda can produce 80 caps and 20 backpacks. Answer the following questions and show all calculations to support your answers.
a. Who has the comparative advantage in producing backpacks? Explain with calculations.b. What is Brenda's opportunity cost of making a cap compared to Gary's? Explain with calculations.c. Based on your calculations in a) and b) above, who should specialize in making what if they intend to trade? Explain with calculations.d. If Gary and Brenda decide to specialize in what they do best, what would be the new production per day for each of them? Explain with calculations.e. If Gary and Brenda decide to trade, what would be the terms of trade for a backpack and how does each benefit from trading? Explain with calculations.
The figure below depicts the production possibilities
curve (PPC) of a country. It also depicts the
consumption possibilities curve (CPC) when the country
is engaged in trade with one other country. Point C is
this country's consumption when that trade occurs.
Quantity of 350
good y
300
250
200
150
100
50
0
0
20
40
19
C
60
80
100
120
Quantity of good x
Calculate how much this country trades with the other
country in good y when the two countries engage in
free trade. Enter a whole number only. Enter a positive
number if this country exports good y, and a negative
number if it imports it. Enter O if the answer cannot be
obtained with the information given. Since this is a
graphical question, approximate answers (within 20 of
the exact answer) are accepted. Hint: consider how
much the country produces and consumes this good.
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