PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 2, Problem 5RQ
To determine
The effect of technological innovation on the
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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)
Once again, consider Babs and Donna, who can each produce cake, beer, or some combination of
the two using only 40 hours of labor each. Babs can produce a maximum of 50 cakes if she
produces no beer, and 100 units of beer if she produces no cake. Donna can produce a maximum
of 100 cakes with no beer produced; if she makes no cake, she can produce 120 units of beer.
has the comparative advantage in cake production;
has the comparative
advantage in beer production.
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O Donna; Babs
O Babs; Babs
O Babs; Donna
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Vega and Sentra are two countries that both produce chicken and vegetables. In Vega each worker in a one-hour period can produce either 9.05 pounds of chicken or 5.76 pounds of vegetables. In Sentra each worker in a one-hour period can produce either 25.49 pounds of chicken or 8.17 pounds of vegetables. Suppose both countries have constant opportunity cost of production and decide to specialize and exchange. The country that specializes in vegetables is willing to sell 19 pounds of vegetables for at least pounds of chicken. Enter a numerical value, rounded to two decimal places.
Chapter 2 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- part C and D needed only Consider the Production Possibility Frontiers of two countries, Australia and Brazil. Assume both have linear PPFs and the two countries both produce the same two goods: fruits and grain. Given its resources, Australia can produce either 2 units of grain per day or 1 unit of fruits; Brazil can produce either 5 units of grain or 4 units of fruits. (You may, for your own use, find it helpful to draw the Production Possibilities Frontiers for each country, though these won't be included in the answers you provide in you online responses.) a. If there were no trade, what would be the local price of fruits in each country, measured in units of grain? b. If trade is allowed, which country will export fruits and which country will export grain (if any)? c. What are the gains from trading a unit of fruit if the international price of fruit is equal to the average of the local prices in the two countries? d. How are the gains from trade distributed? Comment…arrow_forwardThe blue (inner) curve on the following graph shows the current production possibilities frontier (PPF) for the economy of Wilshire, and the green (outer) curve shows the PPF for Wilshire next year if the economy were to operate at point B today. That is, investment choices today impact the growth of the economy, and thus the PPF for next year. Suppose that this year, the economy is operating at point B, but then an earthquake destroys more capital than is being produced during the year. On the following graph, the PPF that best describes the Wilshire economy next year is ________ (options: PPF1, PPF2, PPF3). PPF1 is orange line PPF2 is purple line PPF3 is tan line.arrow_forwardTo answer this question, use must use the information below: How much more chocolate does John gain from specialization and trade? Production and Consumption Both Todd and John will have 12 hours to produce. Todd will use 8 hours to produce 80 pounds of chocolate and 4 hours to produce 80 pounds of coffee. John will use 4 hours to produce 80 pounds of chocolate, and 8 hours to produce 80 pounds of coffee. Specialization and Trade Todd's production without Trade Using 4 hours as a the time element - Todd can produce 40 pounds of chocolate and 80 pounds of coffee. opportunity cost for chocolate is 80/40 = 2 opportunity cost for coffee is 40/80 = 1/2 Johns's production without Trade Using 4 hours as the time element - John can produce 80 pounds of chocolate and 40 pounds of coffee. opportunity cost for chocolate 40/80 = 1/2 opportunity cost for coffee is 80/20 = 2 Without Trade Totals - John and Todd produce 120 pounds of chocolate, and 120 pounds of coffee. Who Should Produce and Trade?…arrow_forward
- Explain how (if at all) each of the following events affects the location of a country’s production possibilities curve: A new technique improves the efficiency of extracting copper from ore.arrow_forwardAny point on a country's production possibilities curve represents a combination of two goods that an economy will never be able to produce. can produce using all available resources and technology. can produce using some portion, but not all, of its resources and technology. may be able to produce in the future with more resources and/or technology.arrow_forwardHomework (Ch 02) 4. Shifts in production possibilities Suppose Ireland produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for corn, an agricultural good, and airplanes, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of an immigration law that results in fewer workers entering the country. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther. (? 540 450 PPF 360 270 180 90 PPF 300 400 500 600 100 200 CORN (Millions of bushels) AIRPLANES (Thousands)arrow_forward
- In the production possibilities model, economic decay is illustrated by: An inward shift of the production possibilities curve An outward shift of the production possibilities curve The downward slope of the production possibilities curve Moving from a point inside the current production possibilities curve to a point on the current production possibilities curvearrow_forwardQuestion 16 Homework • Unanswered Suppose that in the country of England, two goods can be produced on available agricultural land: wine and wool. Suppose that the opportunity costs of production are constant, so that the PPF is a straight line. Further, when all resources are devoted to wine production, England can produce 200 (thousand) barrels. When all resources are devoted to wool production, England can produce 400 (thousand) bushels of wool. What are the opportunity costs in England of producing a barrel of wine? Type your numeric answer and submitarrow_forwardThe diagram below shows a natural monopoly. If the firm is unregulated, how much deadweight loss will there be? 2$ 100 76 60 56 48 АТС 36 MC 20 MR 288 360 Q 84 144 180 204arrow_forward
- Suppose Ireland produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for corn, an agricultural good, and industrial robots, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a long drought that reduces the amount of water available for farmers to use for irrigation. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther. 120 100 PPF 80 20 PPE 60 120 180 240 300 360 CORN (Millions of bushels) INDUSTRIAL ROBOTS (Thousands)arrow_forwardAccumulation of capital and change in technology bring economic growth, which means that the PPF keeps shifting outward: Production that was unattainable yesterday becomes attainable today; production that is unattainable today will become attainable tomorrow. Why doesn’t this process of economic growth mean that scarcity is being defeated and will one day be gone? (Word count: 150 words max.)arrow_forwardQ4: a; Many countries, including Pakistan, import substantial amounts of goods and services from other countries. However, economists claim that a country can enjoy a high standard of living only if it can produce a large quantity of goods and services itself. Can you reconcile these two facts? ( Maximum 100 words). b: Given the production function Y= AF (L, K, H, N), explain the determinants of productivity. ( Maximum100 words). c: Population growth has a variety of effects on productivity. Explain this statement and justify your answer. (Maximum 200 words).arrow_forward
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