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Decent Essays

1. Suppose that there are two states that do not trade: Iowa and Nebraska. Each state produces the same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat is 3 bushels of corn. For Nebraska the opportunity cost of producing 1 bushel of corn is 3 bushels of wheat. Present production is: | |Iowa |Nebraska | |Wheat |20 million bushels |120 million bushels | |Corn |120 million bushels |20 million bushels | a. Explain how, with trade, Nebraska can wind up …show more content…

And Nebraska would produce 180m of wheat Part B: Trader would gain 40m bushels of wheat and 40m bushels of Corn extra. Answer 2 Given data: Number of Carpets Q=112,000-500P+5M Q= number of carpets P= price of carpets (dollar per unit M= consumers income per capita; expected value=$20,000 PART 1: Solving Q=112,000-500P+5*20000 Q=112000-500P+1000000 Q=2120000-500P --- 500P=212000-Q P=4240-Q/500 To get TR we multiply P by Q P*Q=4240 Q –Q^2 /500 MR=d(TR)/dQ MR=4240 – 2Q\500 MR =4240 –

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