EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 8220103632225
Author: PARKIN
Publisher: PEARSON
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Chapter 3, Problem 4SPPA
To determine
Graphical representation of production possibilities.
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One million plastic bottles being sold every minute is a pretty stark number showing why this is a problem, particularly when you add it to the fact that less than half are collected for recycling. Plastic has many desirable properties making it a ubiquitous material. Plastics create millions of products and on top of that millions of jobs. The plastic industry is a huge part of the world economy yet its efficiency and negative externalities are often overlooked.
You are a student of economics and you were recentlyasked to make a virtual presentation at a conference based on the article ‘Drink Bottles’.
REQUIED:
1. ‘Drink Bottles’ presents a case of market failure. Explain what is meant by market failure. Be sure to outline the sources of market failure.
Riley and Chad run a water sports business in Noosa. They have to wash the surfboards/kayaks each time they are used and need to decide who should wash what to minimise opportunity cost.
Surfboards
(quantity/hr)
Kayaks
(quantity/hr)
Riley
45
30
Chad
30
40
Which of the following statements are true:
Chad should specialise in washing kayaks.
Riley has a comparative advantage in washing surfboards.
Riley's opportunity cost of washing 1 kayak is washing 1.5 surfboards.
Riley should specialise in washing surfboards because he has an absolute advantage in washing surfboards.
Country A Country B
No. of pencils 100 50
produced
pounds of paper
produced 150 150
a)Country A and Country B can both produce paper and pencils, according to the table above and using the same amount of time and resources. Which country has the absolute advantage in producing each good?
choices
Country A has absolute advantage in pencils, but neither country has absolute advantage in paper
Country A has absolute advantage in both
Country B has absolute advantage in both
Country B has absolute advantage in paper, but Country A has absolute advantage in pencils
Neither country has absolute advantage in either good
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