ECON MICRO
5th Edition
ISBN: 9781337000536
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 2, Problem 3.6P
To determine
The effect on PPF for Wheat and cloth if the supply of capital falls by 10% and the supply of labor increases by 10%.
Concept Introduction:
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2
The Soviet Union's economy grew rapidly in terms of GDP per hour worked in the 1950s, but eventually this growth slowed. Why did this occur?
Capital per hour worked (labor) grew rapidly from 1950 to 1980, but technological change occurred very slowly.
Capital per hour worked (labor) grew slowly, but technological change grew very rapidly.
Increasing implementation of new technologies eventually suffered diminishing marginal returns.
The centrally planned economy invested too heavily in technological change.
Consumption goods eventually took priority.
6. (Production Possibilities) Suppose an economy uses two resources (labor and capital) to produce two goods (wheat and cloth). Capital is relatively more useful in producing cloth, and labor is relatively more usefulin producing wheat. If the supply of capital falls by 10 percent and the supply of labor increases by 10 percent, how will the PPF for wheat and cloth change?
Course: Macroecomonics
Steve and Craig have been shipwrecked on a deserted island in the South Pacific. Their economic activity consists of either gathering pineapples or fishing. We know Steve can catch four fish in one hour or harvest two baskets of pineapples. In the same time Craig can reel in two fish or harvest two baskets of pineapples.
Questions: If they each spend four hours a day fishing and four hours a day harvesting pineapples, how many of each will Steve produce? How many will Craig produce? What will their total production be?
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