Principles Of Microeconomics
7th Edition
ISBN: 9781260111088
Author: Robert H. Frank, Ben Bernanke, Kate Antonovics, Ori Heffetz
Publisher: McGraw-Hill Education
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Chapter 2, Problem 7P
(a)
To determine
Calculate the amount earned by Susan and Tom by selling all they produced on the basis of
(b)
To determine
The maximum amount of coffee and nuts that Susan and Tom can buy in the world market with their income and the combination of 40 pounds of coffee and 8 pounds of nuts is attainable or not.
(c)
To determine
The change in the
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In one day, Dahyun can produce 20 cakes or 40 brownies, and Sana can produce 25 cakes or 125 brownies. Suppose Dahyun and Sana each specialize in producing the good in which they have a comparative advantage.
Select the statement that is TRUE for the following terms of trade: trade 1 cake for 7 brownies
a
Dahyun loses but Sana gains
b
Dahyun gains but Sana loses
c
Dahyun gains but Sana is neither better nor worse off (i.e. she is indifferent)
d
Both Dahyun and Sana are better off
Debra can make either 12 cakes or 16 cookies in 4 hours.Sam can make either 6 cakes or 12 cookies in 4 hours.
a) who has an absolute advantage at producing cakes and who has an absolute advantage at producing cookies? Briefly explain your answer.
b) if Debra and Sam concentrate on producing only the product in which they have a comparative advantage, how many cakes and how many cookies will they produce?
c) state debra's and Sam's opportunity costs of producing one cake and one cookie. Draw and place your answer in a table which looks something like this:
Cake. Cookie
Debra
sam
Consider a simple exchange economy with two people: Bob and Jake. Bob and Jake both have 10 hours of time available. They can use their time to do one of 2 things: make pancakes or make hamburgers. Bob can make 2 hamburgers in an hour or 1 pancake in an hour. Jake can make 3 pancakes in an hour and 2 hamburgers in an hour. Use this information to answer the following question:
Who has absolute advantage in the production of hamburgers and who has absolute advantage in the production of pancakes?
Chapter 2 Solutions
Principles Of Microeconomics
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- Nancy and Bill are auto mechanics. Nancy takes 8 hours to replace a clutch and 6 hours to replace a set of brakes. Bill takes 4 hours to replace a clutch and 2 hours to replace a set of brakes. State whether anyone has an absolute advantage at either task and, for each task, identify who has a comparative advantage. Instructions: Enter your responses rounded to two decimal places. The opportunity cost of replacing a set of brakes for Nancy is 0.75 The opportunity cost of replacing a set of brakes for Bill is 0.50 (Click to select) v has a comparative advantage in brake replacement. (Click to select) v has a comparative advantage in clutch replacement. Neither v has an absolute advantage in brake replacement. Nancy has an absolute advantage in clutch replacement.arrow_forwardNancy and Bill are auto mechanics. Nancy takes 4 hours to replace a clutch and 6 hours to replace a set of brakes. Bill takes 6 hours to replace a clutch and 8 hours to replace a set of brakes. State whether anyone has an absolute advantage at either task and, for each task, identify who has a comparative advantage. Instructions: Enter your responses rounded to two decimal places. The opportunity cost of replacing a set of brakes for Nancy is The opportunity cost of replacing a set of brakes for Bill is (Click to select) has a comparative advantage in brake replacement. (Click to select) has a comparative advantage in clutch replacement. (Click to select) has an absolute advantage in brake replacement. (Click to select) has an absolute advantage in clutch replacement.arrow_forwardNancy and Bill are auto mechanics. Nancy takes 6 hours to replace a clutch and 4 hours to replace a set of brakes. Bill takes 6 hours to replace a clutch and 8 hours to replace a set of brakes. State whether anyone has an absolute advantage at either task and, for each task, identify who has a comparative advantage.Instructions: Enter your responses rounded to two decimal places.The opportunity cost of replacing a set of brakes for Nancy is ? The opportunity cost of replacing a set of brakes for Bill is ? Who has a comparative advantage in brake replacement? Who has a comparative advantage in clutch replacement? Who has? an absolute advantage in brake replacement? Who has an absolute advantage in clutch replacement?arrow_forward
- Suppose 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 4.00 kg4.00 kg of rice for every kilogram of beans. Rick has a production opportunity cost of 2.00 kg2.00 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? Give your answer to two decimals.arrow_forwardIsabella and Antonio are auto mechanics. Isabella takes 8 hours to replace a clutch and 6 hours to replace a set of brakes. Antonio takes 4 hours to replace a clutch and 2 hours to replace a set of brakes. State whether anyone has an absolute advantage at either task and, for each task, identify who has a comparative advantage. Instructions: Enter your responses rounded to two decimal places. The opportunity cost of replacing a set of brakes for Isabella is The opportunity cost of replacing a set of brakes for Antonio is has a comparative advantage in brake replacement. has a comparative advantage in clutch replacement. has an absolute advantage in brake replacement. has an absolute advantage in clutch replacement. Antonio Isabella Antonio Antonioarrow_forwardThe production possibilities frontier (PPF) for Honduras and Brazil, representing hypothetical levels of production, are shown in the graphs. Assume that, without trade, each country is initially producing and consuming at point A on its PPF curve. Suppose these countries decide to trade. Each country will specialize in the production of the good for which it has a comparative advantage. Assume the countries agree to trade. The terms of trade are 6000 tons of bananas for 4000 tons of steel. Move the post‑trade consumption point for each country to reflect their post‑trade consumption. Which good will each country produce? Honduras will produce bananas and Brazil will produce steel. Brazil will produce both bananas and steel. Honduras will produce both bananas and steel. Honduras will produce steel and Brazil will produce bananas.arrow_forward
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