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- Consider the combined production possibility frontier for a two good (fish and apples), two-person (Dianne and Rachel) economy shown in the graph above. It is known that Dianne has a comparative advantage in fish production. Based on this information, identify whether each of the following would be true or false and briefly explain your reasoning. Dianne has an absolute advantage in both fish and apple production. The marginal cost of fish production for Dianne is 1 apple. The marginal cost of apple production for Rachel is 2 fish.10. Jack and Jill work together at an IT company. They are asked to write a new piece of code to fix a bug in some company software, and then they have to give a presentation about it to their colleagues. Between the two of them, Jill works faster. She could write the code in 6 hours, and prepare the presentation in 1 hour. Jack works slower. He would take 7 hours to write the code, and 2 hours to prepare the presentation. Now assume that they have to divide their tasks so that precisely one person works on the code and one person works on the presentation. Who should work on what? Use the concept of comparative advantage in your explanation.Suppose the fictional country of Everglades produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for millet, an agricultural good, and telephoto lenses, 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. TELEPHOTO LENSES (Thousands) 360 300 240 100 120 60 . 10 PPF 20 30 40 MILLET (Millions of bushels) 50 60 PPF
- Jason and Holly produce lollipops and chocolates. Their production possibilities are given by the following functions: Jason: Q = 140 - 10QC %3D Holly: Q = 110 - 5Qc !! Before they trade, Jason is producing and consuming 60 lollipops and 8 chocolates. Before they trade, Holly is producing and consuming 55 lollipops and 11 chocolates. Then they decide to specialize and trade based on comparative advantage. They agree to trade 66 lollipops for 9 chocolates. How many MORE lollipops will Jason have with trade compared to without trade? Answer:Suppose two economies Home (H) and Foreign (F) produce two goods, bread and wine, with only one production factor: labour. Production technology, expressed as marginal product of labour (MPL), is given in the following table: Technologies expressed as MPL Bread Wine Home 1/6 1/12 Foreign 1/4 1/2 Suppose that Home has 2400 units of labour and Foreign has 1800 units of labour. a. ) Derive the Production Possibilities Frontier (PPF) and the Consumption Possibility Frontier (CPF) for Home and Foreign, with bread on the horizontal axis and wine on the vertical axis. What is the autarky equilibrium price of bred relative to wine in each country? b.) What country has the absolute advantage in producing each good? What country has the comparative advantage in producing each good? Briefly explain the difference between these two concepts. Suppose both countries are now free to trade. The world relative price of bread is 1. c. What is the pattern of specialisation and trade?…Assume an economy producing only two goods (shoes and computers) with a fixed amount of productive resources and technology and employing all its productive resources to the maximum.Production in this economy is subjected to the law of diminishing marginal returns and resourcesare assumed to be fully optimized. In addition, the cost of sacrificing shoes for computers andvice versa is 1. On the basis of the foregoing assumptions, answer the following questions: What happens to the PPF when the economy discovers an improved technology for producing shoes?
- Use the graph to answer the following question: Plant R and Plant S both produce radios and calculators. Which of the following statements is most true? A) Plant R has the comparative advantage to produce radios but not calculators. B) Plant R has the comparative advantage to produce both goods. C) Plant S has the comparative advantage to produce radios but not calculators. D) Plant S has the absolute advantage to produce both calculators and radios.Suppose that households have one child each and an income of M per year to spend on their child's education and other goods. Each year they elect to either send their children to a Public School and receive $21,000 worth of education or to a Private School and pay $X to receive $14,000+$X worth of education. For example, if a household chooses to spend X=$5,000 on private education, then they receive $19,000 in education. Students Government Subsidy Fee Total Funding Public School 2.50 million $21,000 $0 $21,000 Private School 1.50 million $14,000 $X* $x*+$14,000 Assume that $ of education funding whether provided by Government Schools or Private Schools are perfect substitutes. Note that for the Private school option, the $14,000 is effectively added to income as a voucher (V), which households can top up with their own spending X on education. Note that households cannot spend more on other goods than their income (that is they may not exchange the Government funding for cash). All…2. Comparative and absolute advantage Elijah and Aneesha are farmers. Each one owns a 16-acre plot of land. The following table shows the amount of squash and maize each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing squash or maize or to produce squash on some of the land and maize on the rest. Elijah Aneesha MAIZE (Pounds) On the following graph, use the blue line (circle symbol) to plot Elijah's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Aneesha's PPF. 160 144 128 112 96 80 64 48 32 16 0 Squash (Pounds per acre) 8 28 0 Maize (Pounds per acre) 8 7 80 160 240 320 400 480 560 640 720 800 SQUASH (Pounds) Elijah's PPF Elijah's opportunity cost of producing 1 pound of maize is maize is pounds of squash. Because Elijah has a comparative advantage in the production of maize, and Aneesha's PPF has an absolute advantage in the production of squash, and ? has an absolute advantage in the…
- Suppose initially that the United States is consuming 2 boots and 18 shirts and Canada is consuming 12 boots and 2 shirts, as indicated in the figure. Then, suppose the United States and Canada specialize by each only producing the good for which they have a comparative advantage and then trade. In particular, suppose the United States trades Canada half of its production for half of what Canada produces. The United States will have ? additional shirt(s) after the trade (enter a numeric response using an integer)In 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.Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. United States Mexico Hamburgers (in tons) Tacos (in tons) Hamburgers (in tons) Tacos (in tons) 162 135 90 108 18 90 180 54 36 45 270 54 Which country has an absolute advantage in producing tacos? The United States Which country has a comparative advantage in producing tacos? Mexico Suppose the United States is currently producing 180 tons of hamburgers and 54 tons of tacos and Mexico is currently producing 36 tons of hamburgers and 45 tons of tacos. If the United States and Mexico each specialize in producing only one good (the good for which each has a comparative advantage), then a total of additional ton(s) of hamburgers can be produced for the two countries combined (enter a numeric response using an integer)
