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Material Type: Assignment; Class: Intro To Macroeconomics; University: University of Hawaii at Hilo; Term: Spring 2006;
Typology: Assignments
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I know I mentioned I was going to have graphing review as optional questions on this home- work, but it turns out that these questions are best suited as a supplement for Chapter 4, so we’ll hold off on those until then. All questions on this problem set are required.
a. What is the opportunity cost of producing 1 sweater in England?
b. What is the opportunity cost of producing 1 sweater in Scotland?
c. Who has the absolute advantage in the production of scones? of sweaters?
d. Who has the comparative advantage in the production of scones? of sweaters?
e. If England and Scotland decide to trade, which commodity will Scotland trade to England? Hint: To gain from trade, people should specialize in what they’re ”good” at, in our sense of the word ”good.”
a. Draw Maria’s production possibilities frontier for reading economics and sociology. Be sure to label the axes.
b. What is Maria’s opportunity cost of reading 100 pages of sociology?
Bats Rackets 0 420 100 400 200 360 300 300 400 200 500 0
a. Graph the production possibilities diagram. Be sure to label each axis.
b. If Athletic Country currently produces 100 bats and 400 rackets, what is the opportu- nity cost of an additional 100 bats?
c. If Athletic Country currently produces 300 bats and 300 rackets, what is the opportu- nity cost of an additional 100 bats?
d. Why does the additional production of 100 bats in (c) cause a greater tradeoff than the additional production in part (b)?
e. Suppose Athletic Country is currently producing 200 bats and 200 rackets. How many additional bats could they produce without giving up any rackets? How many addi- tional rackets could they produce without giving up any bats?
f. Is the production of 200 bats and rackets efficient? Explain.
What we skipped: The notable thing we didn’t cover is that of the Circular Flow Diagram of the first half of Chapter 2. It actually is a rather important concept, but it doesn’t really ”fit in” with our current topics. We shall discuss and take a look at this diagram in depth in Chapter 10.