4. Shifts in production possibilities Suppose the United Kingdom produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for barley, an agricultural good, and cars, 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. CARS (Thousands) 300 250 200 150 100 50 0 0 80 PPF 160 240 320 BARLEY (Millions of bushels) 400 480 PPF ?

4. Shifts in production possibilities Suppose the United Kingdom produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for barley, an agricultural good, and cars, 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. CARS (Thousands) 300 250 200 150 100 50 0 0 80 PPF 160 240 320 BARLEY (Millions of bushels) 400 480 PPF ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The table below shows the productivity level of each country for different goods in terms of how much output can be produced with an hour of labor. In the rightmost column, we have the total labor hours available in each country. Please answer the questions using the data provided in the table. labor (hours) 70 20 U.S. Mexico cotton/hr 70 40 shirt/hr 50 30 a) Describe the comparative advantage of each country. b) c) Plot the production possibilities curve for each country, under autarky. Describe the price range (cotton per shirt) that is acceptable for both countries to trade with each other.
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Suppose that the US economy produces agricultural products (A) and manufactured products (M). Explain and graphically illustrate the impact of each of the following events on the economy’s production possibilities curve (draw a new PPF for each, placing M on the vertical axis). a. Scientists develop a new fertilizer that will increase the productivity of land on which agricultural products are grown. b. The price of manufactured goods increases. c. Russian attacks on Ukraine devastate the Ukrainian wheat crop, increasing their demand for American wheat. d. The government increases taxes on manufactured goods.
2. Comparative and absolute advantage David and Morgan are farmers. Each one owns an 18-acre plot of land. The following table shows the amount of zucchini and watermelon each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing zucchini or watermelon or to produce zucchini on some of the land and watermelon on the rest. David Morgan WATERMELON (Pounds) 180 162 On the following graph, use the blue line (circle symbol) to plot David's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Morgan's PPF. 144 126 108 90 72 54 36 1.8 0 Zucchini (Pounds per acre) 28 0 zucchini. 18 90 180 Watermelon (Pounds per acre) 7 6 270 360 450 540 630 720 810 900 ZUCCHINI (Pounds) David's opportunity cost of producing 1 pound of watermelon is pound of watermelon is David's PPF Morgan's PPF has an absolute advantage in the production of zucchini, and has an absolute advantage in the production of watermelon. pounds of…
1) Suppose the U.S. government wants to stop importing foreign cars. They believe by not importing cars from other countries they will have absolute advantage in manufacturing cars, and this will help the U.S. economy. Explain what is wrong with this idea. Use a graph to illustrate your point.
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25. Assuming labor is the only resource and England has 60 man-hours (mhrs) and Portugal 180 mhrs of labor resource available for production, which country has the comparative advantage in wine? a) Portugal b) England c) Both d) Neither e) Cannot tell
12. Suppose that, on the basis of a nation’s production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9000 pizzas. Relate this information to the following statement: “Through international specialization and trade, a nation can reduce its opportunity cost of obtaining goods and thus ‘move outside its production possibilities curve.
7. Two people make up a small economy producing oats and/or shirts. The table below shows the maximum each individual can produce in one day for each good (and any linear combination). Sam Lindsay Oats 300 150 Shirts 100 75 a) Who has the comparative advantage in producing Oats? In producing shirts? b) In terms of shirts, what is the cost of producing one unit of oats for Sam? For Lindsay? c) If the total number of shirts produced is 100, then how many units of oats will be produced if production takes place according to comparative advantage?
2. Consider a simple exchange economy with two people: Bob and Jake. Bob and Jake both have ten hours of time available. They can use their time to do one of two things: make pancakes or make hamburgers. Bob can make two hamburgers in an hour or one pancake in an hour. Jake can make three pancakes in an hour or four hamburgers in an hour. a.) Draw Bob and Jake’s PPFs with hamburgers on the x-axis. Give equations for both PPFs in y=mx+b form. b.) Can Bob and Jake both benefit from trade if the terms of trade are three pancakes per hamburger? Why or why not?
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