Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
8th Edition
ISBN: 9780134641843
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 3, Problem 5IAPA
To determine
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Suppose two nations, Beta and Gamma, each make aircraft and corn. The main resource in each nation is hours of "labor". Production occurs in each nation according to the following table. With one hour, a worker in each nation can produce the following:
Table showing Aircraft and Corn produced per hour
Aircraft
Corn
Beta
1 per hour
500 per hour
Gamma
2 per hour
300 per hour
What is the opportunity cost of each good (in terms of the other good) for each nation? Try creating a small table of the opportunity costs such as this:
Beta: 1 aircraft = _______ corn 1 corn = _______ aircraft
Gamma: 1 aircraft = _______ corn 1 corn = _______ aircraft
Which nation has the Absolute Advantage in aircraft? Which nation has the Absolute Advantage in corn?
Which nation has the Comparative Advantage in aircraft? Which nation has the Comparative Advantage in corn?
If these two nations trade, what good should each specialize in and export to the other?
What…
Suppose a nation has a total of 12 units of labor, which can be used to produce either guns or butter. One gun takes 6 units of labor to produce and 1 butter takes 2 units of labor to produce.
What is the maximum quantity of guns that can be produced?
What is the maximum quantity of butter than can be produced?
Draw the nation's production possibility curve. (Photo's are note accepted)
What is the opportunity cost of guns in this nation?
Explain why the nation can't produce both 3 guns and 4 butters.
Explain why the nation shouldn't produce both 1 gun and 2 butters.
Suppose a nation has a total of 12 units of labor, which can be used to produce either guns or butter. One gun takes 6 units of labor to produce and 1 butter takes 2 units of labor to produce.
1. Why can't the nation produce both 3 guns and 4 butters?
2. Why can't the nation produce both 1 gun and 2 butters?
3. What is the opportunity cost of guns in this nation?
Chapter 3 Solutions
Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
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