What are the definitions of the following economic principles and give 1 brief example each: - scarcity principle? - cost-benefit principle? - principle of unequal cost?
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What are the definitions of the following economic principles and give 1 brief example each:
- scarcity principle?
- cost-benefit principle?
- principle of unequal cost?
- principle of
- principle of increasing
- equilibrium principle?
- efficiency principle?
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Solved in 2 steps
- Firm A Firm B 18- 14- 16 14- 12 10- 12 8 10- B. 8- 6- 4- 2- 2- 10 12 14 16 18 20 22 10 Corn Corn Part A What is the opportunity cost of one unit of barley for Firm A?O What is the opportunity cost of one unit of barley for Firm B? Give your answers as fractions. Part B What is the opportunity cost of one unit of corn for Firm A? What is the opportunity cost of one unit of corn for Firm B? Give your answers as fractions. Part C In which good does Firm A have a comparative advantage? In which good does Firm B have a comparative advantage? Part D In what good or goods does Firm A have an absolute advantage? In what good or goods does Firm B have an absolute advantage? Part E Suppose Firm A and Firm B divide their time equally between the production of both goods. What will be the total production of corn? units Now suppose both firms completely specialize in the product in which they have a comparative advantage and trade with one another.1. Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why? Consider the following pairs of Which would you expect to have the more elastic demand? Why? water or diamonds insulin or nasal decongestant spray food in general or breakfast cereal gasoline over the course of a week or gasoline over the course of a year personal computers or IBM personal computers3. Are the following statements true or false? Explain in each case. (a) "Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods." (b) "Certain very talented people have a comparative advantage in everything they do." (c) "If a certain trade is good for one person, it can?t be good for the other one."
- Three students are working on a group project. The project involves three distinct tasks: research, writing, and presentation. One student, Jack, is faster at all three of these tasks than the other members of the group. (a) Does Jack have an absolute advantage in all three tasks? (b) Does Jack have a comparative advantage in all three tasks? (c) Explain in approximately 1-4 sentences why this group will be more efficient if they specialize according to comparative advantage rather than absolute advantage.2. Comparative and absolute advantage Musashi and Rina run a catering business in which they have two major tasks: getting new clients and preparing food for events and parties. It takes Musashi 16 hours to prepare the food for an event and 4 hours of effort to get each new client. For Rina, it takes 10 hours to prepare food for an event and 5 hours to get a new client. In this scenario, has an absolute advantage in food preparation, and has a comparative advantage in food preparation. Suppose that initially, Musashi and Rina are splitting both tasks for a large number of events. Then they decide to start shifting some work according to the principle of comparative advantage. In particular, the person with the comparative advantage in food preparation will take over preparing food for one more event by taking the necessary time away from getting more clients, and the other person will use the freed-up time from not preparing food for one event to get more clients. As a result, the…1. Consider a market of two farmers which are also consumers. The following table contains the maximum production levels over a time period of 8 hours for both wheat and wine. As usual, we assume linear production possibility frontiers. Farmer Wheat Wine 10kg 15kg Albert 21 Berta 11 (a) Identify absolute advantages for each good. (b) Identify comparative advantage. (c) How does the comparative advantage change when calculated over 1 hour of production time? (d) How should Albert and Berta specialise? Who will trade what? (e) Given their production and consumption before trade, Production/Consumption WVheat Wine Albert 5kg 7.5kg 11 Berta 0.51 Assume production changes to the following . 1
- 2. Comparative and absolute advantage Gilberto and Juanita are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of rye and corn each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing rye or corn or to produce rye on some of the land and corn on the rest. for the drop down box selections. The option for first is Juanita or Gilberto, for the second its also Juanita or Gilberto, for third its lower or higher, for fourth its Juanita or Gilberto, and for 5th its also Juanita or Gilberto3. Suppose that there are 10 million workers in Canada and that each of these workers can produce either 2 cars or 30 bushels of wheat in a year. a) What is the opportunity cost of producing a car in Canada? What is the opportunity cost of producing a bushel of wheat in Canada? Explain the relationship between the opportunity costs of the two goods. b) Draw Canada’s production possibilities frontier. If Canada chooses to consume 10 million cars, how much wheat can it consume without trade? Label this point on the production possibilities frontier. c) Now suppose that the United States offers to buy 10 million cars from Canada in exchange for 20 bushels of wheat per car. If Canada continues to consume 10 million cars, how much wheat does this deal allow Canada to consume? Label this point on your diagram. Should Canada accept the deal?Table 19.15 shows how the average costs of production for semiconductors (the "chips" in computer memories) change as the quantity of semiconductors built at that factory increases. a. Based on these data, sketch a curve with quantity produced on the horizontal axis and average cost of production on the vertical axis. How does the curve illustrate economies of scale? b. If the equilibrium quantity of semiconductors demanded is 90,000, can this economy take full advantage of economies of scale? What about if quantity demanded is 70,000 semiconductors? 50,000 semiconductors? 30,000 semiconductors? c. Explain how international trade could make it possible for even a small economy to take full advantage of economies of scale, while also benefiting from competition and the variety offered by several producers. Quantity of Semiconductors 10,000 20,000 30,000 40,000 100,000 Table 19.15 Average Total Cost $8 each $5 each $3 each $2 each $2 each
- Question: Which of the following best describes the concept of opportunity cost in economics? A) The total cost of producing a good or service B) The monetary cost of purchasing a good or service C) The value of the next best alternative forgone when a decision is made D) The additional cost incurred when producing one more unit of a good or serviceBARLEY (Bushels) 120 108 96 84 72 60 48 36 24 12 0 0 60 120 180 240 300 300 420 480 540 600 ALFALFA (Bushels) has an absolute advantage in the production of alfalfa, and Darnell's opportunity cost of producing 1 bushel of barley is barley is bushels of alfalfa. Because Darnell has a comparative advantage in the production of barley, and -O Darnell's PPF Eleanor's PPF has an absolute advantage in the production of barley. bushels of alfalfa, whereas Eleanor's opportunity cost of producing 1 bushel of opportunity cost of producing barley than Eleanor, has a has a comparative advantage in the production of alfalfa.2. Comparative and absolute advantage Yakov and Ana are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of alfalfa and barley each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing alfalfa or barley or to produce alfalfa on some of the land and barley on the rest. Alfalfa Barley (Bushels per acre) (Bushels per acre) Yakov 20 Ana 28