Microeconomics
2nd Edition
ISBN: 9781259813337
Author: KARLAN, Dean S., Morduch, Jonathan
Publisher: Mcgraw-hill Education,
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Chapter 2, Problem 6PA
To determine
To analyze: which point on
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Q1. What is the difference between Straight line PPF and bowed outward PPF?
Why does this PPF have a bowed-out shape?
How can the economy increase its production of both tea and snacks?
Graph the PPF with and show an increase in its production.
For both goods, assume output per hour remains constant as the number of workers allocated to that good changes.
Wakanda produces both vibranium and adamantium.
With vibranium on the vertical axis and adamantium on the horizontal what happens to the PPF if workers become more productive in producing vibranium but adamantium productivity does not change?
Group of answer choices
A.The PPF becomes steeper.
B.The PPF becomes flatter.
C.The PPF shifts out, with the new PPF parallel to the initial PPF.
D.The PPF shifts out, but we do not know how the slope of the new PPF compares to the slope of the original PPF.
E.The effect on the PPF need not be any of the above.
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- Q32 Consider the Production Possibility Frontiers of two countries, Australia and Brazil. Assume both have linear PPFs and the two countries both produce the same two goods: fruits and grain. Given its resources, Australia can produce either 2 units of grain per day or 1 unit of fruits; Brazil can produce either 5 units of grain or 4 units of fruits. (You may, for your own use, find it helpful to draw the Production Possibilities Frontiers for each country, though these won't be included in the answers you provide in you online responses.) a. If there were no trade, what would be the local price of fruits in each country, measured in units of grain? b. If trade is allowed, which country will export fruits and which country will export grain (if any)? c. What are the gains from trading a unit of fruit if the international price of fruit is equal to the average of the local prices in the two countries? d. How are the gains from trade distributed? Comment on why the benefits…arrow_forwardBetween a straight line PPF and a concave PPF, which one is more realistic? Why?Defend your answer.arrow_forwardpart C and D needed only Consider the Production Possibility Frontiers of two countries, Australia and Brazil. Assume both have linear PPFs and the two countries both produce the same two goods: fruits and grain. Given its resources, Australia can produce either 2 units of grain per day or 1 unit of fruits; Brazil can produce either 5 units of grain or 4 units of fruits. (You may, for your own use, find it helpful to draw the Production Possibilities Frontiers for each country, though these won't be included in the answers you provide in you online responses.) a. If there were no trade, what would be the local price of fruits in each country, measured in units of grain? b. If trade is allowed, which country will export fruits and which country will export grain (if any)? c. What are the gains from trading a unit of fruit if the international price of fruit is equal to the average of the local prices in the two countries? d. How are the gains from trade distributed? Comment…arrow_forward
- Suppose Russia produces only cars and trucks. The resources that are used in the production of these two goods are not specialized—that is, the same set of resources is equally useful in producing both trucks and cars. The shape of Russia's production possibilities frontier (PPF) should reflect the fact that as Russia produces more trucks and fewer cars, the opportunity cost of producing each additional truck _______? The following graphs show two possible PPFs for Russia's economy: a straight-line PPF (PPF1PPF1) and a bowed-out PPF (PPF2PPF2). Based on the previous description, the trade-off Russia faces between producing trucks and cars is best represented by _____?arrow_forwardConsider Economia, a nation that produces only clothes and food. On their straight-line PPF, food is measured on the horizontal axis and clothes are measured on the vertical axis. If Economia produces no food, it can produce 1200 units of clothing; if it produces no clothing, it can produce 4800 units of food. Calculate the slope of the nation's PPF. Economia would like to produce one more unit of food. To do so, it must sacrifice how many units of clothing?arrow_forwardA farmer can produce 10,000 pears (X) on his one-acre farmland, and when he uses the same land for apple cultivation, a total of 5,000 apples (Y) can be produced. He realizes that with the introduction of a new fertilizer, he can increase the maximum production of apples to 7,000. The maximum production of pears, however, remains unchanged. Hence, his new PPF equation is?arrow_forward
- Assume an economy producing only two goods (shoes and computers) with a fixed amount of productive resources and technology and employing all its productive resources to the maximum.Production in this economy is subjected to the law of diminishing marginal returns and resourcesare assumed to be fully optimized. In addition, the cost of sacrificing shoes for computers andvice versa is 1. On the basis of the foregoing assumptions, answer the following questions: What happens to the PPF when technological change overwhelmingly favours the production of computers?arrow_forwardUse the PPF to answer the following questions: (a) At point F, how many sweaters are being produced? How many hard drives? (b) Label points A-H as either efficient, inefficient, or unattainable. (c) Can we determine if point F is productively efficient? If so, is it productively efficient? (d) Can we determine if point F is allocatively efficient? If so, is it allocatively efficient?arrow_forwardRefer to the information provided in Figure 1 below. Which of the following causes the ppf to shift from ppf2 to ppf3? Group of answer choices Technological progress An increase in the labor force An increase in capital stock All of the abovearrow_forward
- Which of the above 4 graphs best represents the change in the PPF if a tornado destroys part of the country? A. Graph A. B. Graph B. C. Graph C. D. Graph D.arrow_forwardMeanwhile, in the country of Portugal, wool and wine can also be produced according to a linear PPF. However, when all resources are devoted to production of wine, Portugal can produce 100 barrels, but when all resources are devoted to wool production, Portugal can produce 50 bushels What are the opportunity costs in Portugal of producing a bushel of wool?arrow_forwardMeanwhile, in the country of Portugal, wool and wine can also be produced according to a linear PPF. However, when all resources are devoted to production of wine, Portugal can produce 100 barrels, but when all resources are devoted to wool production, portugal can produce 50 bushels. What are the opportunity costs in Portugal of producing a barrel of wine?arrow_forward
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