PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 2, Problem 3P
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If country A uses all of its resources efficiently, it can produce a maximum of 100 units of good X. If country A uses all of its resources efficiently, it can produce a maximum of 150 units of good Y.
If country B uses all of its resources efficiently, it can produce a maximum of 75 units of good X. If country B uses all of its resources efficiently, it can produce a maximum of 125 units of good Y.
Both countries have (linear) straight line PPFs. What is the opportunity cost of producing 50 units of Y in country B? (hint: your answer should be measured in the positive number of units of good X that must be given up - round your answer to two decimal places only if necessary)
If country A uses all of its resources efficiently, it can produce a maximum of 100 units of good X. If country A uses all of its resources efficiently, it can produce a maximum of 150 units of good Y.
If country B uses all of its resources efficiently, it can produce a maximum of 75 units of good X. If country B uses all of its resources efficiently, it can produce a maximum of 125 units of good Y.
Both countries have (linear) straight line PPFs. If these countries were going to trade after specializing in their respective comparative advantages, which of the following trades would be considered to be mutually beneficial where BOTH countries gain from trade (and are strictly better off than in autarky, the situation where they both self-reliant and do not trade with one another)?
trade at a rate of 3X for 4Y
trade at a rate of 2X for 3Y
trade at a rate of 5X for 8Y
trade at a rate of 3X for 5Y
If country A uses all of its resources efficiently, it can produce a maximum of 100 units of good X. If country A uses all of its resources efficiently, it can produce a maximum of 150 units of good Y.
If country B uses all of its resources efficiently, it can produce a maximum of 75 units of good X. If country B uses all of its resources efficiently, it can produce a maximum of 125 units of good Y.
Both countries have (linear) straight line PPFs.
Which of the following must be true? check all that apply
A and B have the same access to resources (inputs)
A can produce more X than B with the same resources
A can produce more Y than B could with the same resources
B can produce Y at a lower opportunity cost than A
Chapter 2 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- If country A uses all of its resources efficiently, it can produce a maximum of 100 units of good X. If country A uses all of its resources efficiently, it can produce a maximum of 150 units of good Y. If country B uses all of its resources efficiently, it can produce a maximum of 75 units of good X. If country B uses all of its resources efficiently, it can produce a maximum of 125 units of good Y. Both countries have (linear) straight line PPFs. Which of the following must be true? (check all that apply) A and B have the same access to resources A has the absolute advantage in producing Y A has the absolute advantage in producing X B has the comparative advantage in producing Yarrow_forwardIf country A uses all of its resources efficiently, it can produce a maximum of 100 units of good X. If country A uses all of its resources efficiently, it can produce a maximum of 150 units of good Y. If country B uses all of its resources efficiently, it can produce a maximum of 75 units of good X. If country B uses all of its resources efficiently, it can produce a maximum of 125 units of good Y. Both countries have (linear) straight line PPFs. What is the opportunity cost of producing 10 units of X in country A? (hint: your answer should be measured in the positive number of units of good Y that must be given up - round your answer to two decimal places only if necessary)arrow_forwardSuppose there are two countries that are identical in their factor endowments. Both would like to consume both passenger cars and commercial vehicles, industries in which there are economies of scale. In the absence of trade, each country would have both industries. If they could trade, both could benefit by specializing and taking advantage of economies of scale to lower their costs of production. Assume that once trade becomes possible, country A specializes in producing passenger cars and country B specializes in producing commercial vehicles. Because of economies of scale, the cost of passenger cars relative to commercial vehicles is lower in country A than in country B. Explain why we would expect to observe trade in similar products, known as intra- industry trade, when production technology is characterized by economies of scales? Who are the winners and losers in this example? How does your result compare with that of the winners and losers in the CORE textbook example of the…arrow_forward
- You have decided to specialize in gathering firewood while Friday has specialized in fishing. Your time allocation sliders are set to allocate all of your time to gathering firewood. Now, use the additional sliders to state how many logs you will trade to Friday and how many fish you want in return. You must select a trade that make both you and Friday better off than you were before specialization and trading. In other words, you must both receive more than 2000 calories of fish and 32 logs of firewood. Both you and Friday’s consumption point is displayed on the PPF graphs as you adjust the trade.arrow_forwardIn the Davis household, husband Peter can cook 1 dinner in 60 minutes, and do 1 load of laundry in 30 minutes. Wife Angelica can cook 1 dinner in 30 minutes, and do 1 load of laundry in 20 minutes. Peter has an absolute advantage in cooking, and Angela has an absolute advantage in doing laundry. Angela has an absolute in cooking, and Peter has an absolute advantage in doing laundry Peter has an absolute advantage in cooking, and an absolute advantage in doing laundry. Angela has an absolute advantage in cooking, and an absolute advantage in doing laundry.arrow_forwardHelp please Level 2: Opportunity Cost, Comparative Advantage, and Specialization You have decided to specialize in gathering firewood while Friday has specialized in fishing. Your time allocation sliders are set to allocate all of your time to gathering firewood. Now, use the additional sliders to state how many logs you will trade to Friday and how many fish you want in return. You must select a trade that make both you and Friday better off than you were before specialization and trading. In other words, you must both receive more than 2000 calories of fish and 32 logs of firewood. Both you and Friday’s consumption point is displayed on the PPF graphs as you adjust the trade. There is a bar for me to slide over for fish and firewood for the number of hours (12 ohours total to be be used between both)arrow_forward
- Two countries each produce only pork and apples. Peru can produce either 25 thousand pounds of pork or 50 thousand pounds of apples per year. Nicaragua can produce either 20 thousand pounds of pork or 80 thousand pounds of apples per year. Suppose the countries completely specialize and they decide to trade 8 thousand pounds of pork for 24 thousand pounds of apples. After trade, Peru can consume thousand pounds of pork and thousand pounds of apples. After trade, Nicaragua can consume thousand pounds of pork and thousand pounds of apples.arrow_forwardNeha and Lorenzo need to decide which one of them will take time off from work to complete the rather urgent task of digging postholes for their new fence. Neha is pretty good with a post auger; she can dig the holes in 30 minutes. Lorenzo is somewhat slow; it takes him 5 hours to dig the holes. Neha earns $110 per hour as a personal trainer, while Lorenzo earns $25 per hour as a clerk. Keeping in mind that either Neha or Lorenzo must take time off from work to dig the holes, who has the lower opportunity cost of completing the task? a) Neha and Lorenzo face identical opportunity costs b)Neha C)Lorenzoarrow_forwardScott and Cindy both produce only pizza and tacos. In one hour, Cindy can produce 20 pizzas or 40 tacos. In one hour, Scott can produce 40 pizzas or 50 tacos. Based on this information, the person specializing in the production of tacos is willing to sell 10 tacos in return for at least pizzas and the other person is willing to pay no more than pizzas for the 10 tacos. Enter numerical values, rounding to two decimal places, and do not enter fractions. For example, enter 23.00 or 43.12.arrow_forward
- In a simple exchange economy, Alex and Sid both have identical lexicographic preferences with a preference for maple syrup. This means that when comparing any two bundles, each of them would prefer the one with the larger amount of maple syrup regardless of the amount of poutine in those bundles. If the two bundles have identical amounts of maple syrup, then they would choose the one with a larger amount of poutine. The total amount of maple syrup in this economy is 15, and there are 21 plates of poutine. Describe the contract curve in this economy and justify your answer.arrow_forwardQ/ Country X and Country Y are neighbours. Both Country X and Country Y can produce two goods: food and clothing. In one week, Country X can produce 4,400 clothing units or 2,200 food units, or a mix of the two. In one week, Country Y can produce 5,000 clothing units or 2,000 food units, or a mix of the two.For both Country X and Country Y, their individual trade-offs between clothing units and food units are constant, regardless of how they allocate their time. Currently, Country X produces 2,400 clothing units and 1,000 food units per week while Country Y produces 2,500 clothing units and 1,000 food units per week. c. Which country has a comparative advantage in food production? Which country has acomparative advantage in clothing production? Illustrate your answer using the PPC and showall the calculations. d. Should Country X and Country Y specialize and trade with one another? Why?arrow_forwardSuppose there are two individuals, Casey and Rick, who live in a very simplified world where only two goods are produced and consumed; rice and beans. The production opportunity cost for Casey is 4.00kg of rice for every kilogram of beans. Rick has a production opportunity cost of 2.00 kg of rice for every kilogram of beans. Casey eventually realizes that, through trade, both individuals can be better off. Rick is willing to trade. What price can be settled between these two parties such that both individuals can enjoy more rice and beans?arrow_forward
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