Microeconomics
2nd Edition
ISBN: 9781259813337
Author: KARLAN, Dean S., Morduch, Jonathan
Publisher: Mcgraw-hill Education,
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Chapter 2, Problem 3RQ
To determine
To explain:
The absolute advantages at baking both cookies and cupcakes.
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In the Davis household, husband Peter can cook 1 dinner in 60 minutes, and do 1 load of laundry in 30 minutes. Wife Angelica can cook 1 dinner in 30 minutes, and do 1 load of laundry in 20 minutes. Peter has an absolute advantage in cooking, and Angela has an absolute advantage in doing laundry. Angela has an absolute in cooking, and Peter has an absolute advantage in doing laundry Peter has an absolute advantage in cooking, and an absolute advantage in doing laundry. Angela has an absolute advantage in cooking, and an absolute advantage in doing laundry.
You have decided to specialize in gathering firewood while Friday has specialized in fishing. Your time allocation sliders are set to allocate all of your time to gathering firewood. Now, use the additional sliders to state how many logs you will trade to Friday and how many fish you want in return. You must select a trade that make both you and Friday better off than you were before specialization and trading. In other words, you must both receive more than 2000 calories of fish and 32 logs of firewood. Both you and Friday’s consumption point is displayed on the PPF graphs as you adjust the trade.
An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes.
Who has the absolute advantage in coffee? Explain.
Who has the comparative advantage in coffee? Explain.
If the two countries specialize and trade with each other, who will import coffee? Explain.
Assume that the two countries trade and that the country importing coffee trades 2 ounces of soybeans for 1 ounce of coffee. Explain why both countries will benefit from this trade.
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- Olivia and Yixing are volunteering at a cat rescue shelter. The shelter supervisor asks them to clean out kennels and haul bags of cat food from the donation area into storage. It takes Olivia 6 minutes to clean out a kennel and 6 minutes to move a bag of food. It takes Yixing 10 minutes to clean out a kennel and 12 minutes to move a bag of food. For the following questions, round each answer to the nearest tenth. a. ( Yixing, Olivia _______has an absolute advantage in completing both tasks. b. Olivia’s opportunity cost of cleaning a kennel: _____ bags of food moved. c. Olivia’s opportunity cost of moving one bag of food: ______kennels cleaned. d. Yixing’s opportunity cost of cleaning a kennel: ______bags of food moved. e. Yixing’s opportunity cost of moving one bag of food: ______kennels cleaned. f. Yixing says it does not matter which task each of them performs, because Olivia is faster at both tasks.…arrow_forwardTwo countries decide to specialize in producing certain goods to export to other countries, and in return they import different goods from these other countries. The advantage of these exports and imports is: Group of answer choices the country will be able to produce at a point outside your production possibilities frontier. the country will be able to consume at a point outside your production possibilities frontier. the countries will be able to produce and consume at a point outside your production possibilities frontier. the country's production possibilities frontier will shift outward.arrow_forwardConsider a hypothetical world with two countries: Country A and Country B. Each country has 45 workers, who produce cars and bicycles. If Country A shifts all its workers to one good, it can produce 1,350 cars or 2,520 bicycles. Under the same conditions, Country B can produce 1,710 cars or 2,880 bicycles. Therefore, Country B has an absolute advantage in producing both goods. Nevertheless, the two countries decide to trade, so each shift production to their areas of comparative advantage. Determine which good Country A will specialize in. Then, calculate the quantity of this good the country will produce after trade if only 40 workers are involved. If necessary, round any intermediate calculations to two decimal places and your final answer to the nearest whole number.arrow_forward
- You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gummies, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gummies decreases by 5%, the quantity of frizzles sold decreases by 4% and the quantity of kipples sold increases by 6%. Your job is to use the cross-price elasticity between guppy gummies and the other goods to determine which goods your marketing firm should advertise together. Relative to Guppy Gummies Recommend Marketing with Guppy Gummies Cross-Price…arrow_forwardSuppose that Glacier and Denali agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 6 million pounds of corn for 6 million pounds of pistachios. This ratio of goods is known as the price of trade between Glacier and Denali.arrow_forwardWhen can two countries gain from trading two goods? when the first country can only produce the first good and the second country can only produce the second good when the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cost when the first country is better at producing both goods and the second country is worse at producing both goods Two countries could gain from trading two goods under all of the above conditions.arrow_forward
- Bob and Erik are both experienced in making pizzas and burgers. In one day, Bob can make 8 pizzas or 32 burgers. With the same effort and in the same day, Erik can make 12 pizzas or 36 burgers. Who has the absolute advantage in making pizzas and who has the absolute advantage in making burgers? Who has the comparative advantage in each activity? Show your derivations. According to the principle of comparative advantage, in which activity should each person (Bob and Erik) specialize in order to gain from trade? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardAfter specialization, suppose the two agree on a price of 7 units of good X for each unit of good Y. When the two individuals make the trade, they exchange 140 units of good X for 20 units of good Y. Recall that the individual who has specialized in the production of X would trade 140 units of good X and receive 20 units of good Y, while the individual who specialized in the production of good Y would trade 20 units of good Y and receive 140 units of good X.arrow_forwardSuppose that an hour of work in Brazil can produce 1 pound of coffee or 4 pounds of sugar. In Colombia, an hour of work produces 2 pounds of coffee or 5 pounds of sugar. Which country has the absolute advantage in coffee? In sugar? Calculate the opportunity cost of each good in each country. Which country has the comparative advantage in each good? Why? What would be a mutually beneficial terms of trade?arrow_forward
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