Mindtap Economics, 1 Term (6 Months) Printed Access Card For Arnold's Macroeconomics, 13th
13th Edition
ISBN: 9781337621397
Author: Arnold, Roger A.
Publisher: Cengage Learning
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Question
Chapter 2, Problem 4QP
To determine
Calculation of slope.
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What does the slope of a curve between two points have to do with the opportunity cost of producing additional units of good?
Let assume, you live in an economy where two goods are being produced (say x and y) and labor can
be allocated in the production of either good freely, but the other factor is specific. For your more
information, good X" can be produced with labor and capital and good "y" can be produced with labor
and land.
Given the situation,
a) How much does the each good the economy produced?
b) How much labor will be employed in each sector?
Consider the problem of an individual that has Y dollars to spend on consuming over
two periods. Let c, denote the amount of consumption that the individual would like
to purchase in period 1 and c2 denote the amount of consumption that the individual
would like to consume in period 2. The individual begins period 1 with Y dollars and
can purchase c1 units of the consumption good at a price P and can save any unspent
wealth. Use sı to denote the amount of savings the individual chooses to hold at the end
of period 1.
Any wealth that is saved earns interest at rate r so that the amount of wealth the
individual has at his/her disposal to purchase consumption goods in period 2 is (1+r)s1.
This principal and interest on savings is used to finance period 2 consumption. Again,
for simplicity, we can assume that it costs P2 dollars to buy a unit of the consumption
good in period 2.
2
The individual's total happiness is measured by the sum of period utility across time,
u(cı) + u(c2). Let u(c)…
Chapter 2 Solutions
Mindtap Economics, 1 Term (6 Months) Printed Access Card For Arnold's Macroeconomics, 13th
Ch. 2.1 - Prob. 1STCh. 2.1 - Prob. 2STCh. 2.1 - Prob. 3STCh. 2.1 - Prob. 4STCh. 2 - Prob. 1QPCh. 2 - Prob. 2QPCh. 2 - Prob. 3QPCh. 2 - Prob. 4QPCh. 2 - Prob. 5QPCh. 2 - Prob. 6QP
Ch. 2 - Prob. 7QPCh. 2 - Prob. 8QPCh. 2 - Prob. 9QPCh. 2 - Prob. 10QPCh. 2 - Prob. 11QPCh. 2 - Prob. 12QPCh. 2 - Prob. 13QPCh. 2 - Prob. 1WNGCh. 2 - Prob. 2WNGCh. 2 - Prob. 3WNGCh. 2 - Prob. 4WNGCh. 2 - Prob. 5WNGCh. 2 - Prob. 6WNGCh. 2 - Prob. 7WNGCh. 2 - Prob. 8WNGCh. 2 - Prob. 9WNGCh. 2 - Prob. 10WNGCh. 2 - Prob. 11WNGCh. 2 - Prob. 12WNG
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- Drawing a production possibilities frontier (PPF) Instructions: Consider an economy than only produces two goods - Blueberries and Batteries. Step 1: Draw a production possibilities frontier (PPF) for this economy. Label blueberries on the vertical axis and batteries on the horizontal axis. Label one point that is "efficient", one point that is "inefficient", and one point that is "unattainable". Step 2. Draw another PPF of the economy with the axes labeled. Grab another color pen/pencil/highlighter and show how the PPF would change if there was a technological change that increased the production of batteries only. (Hint: The intercept for blueberries will not change.) Clearly label the new PPF. Step 3. Draw another PPF of the economy with the axes labeled. Grab another color pen/pencil/highlighter and show how the PPF would change if there was a drought that destroyed some of the blueberry harvest. (Hint: The intercept for batteries will not change.) Clearly label the new…arrow_forwardShifts in production possibilities Suppose South Africa produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for barley, an agricultural good, and locomotives, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a breakout of avian flu that sickens millions of workers. 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.arrow_forwardDraw a production possibilities curve for food and clothing. If you are operating on the curve, what is the opportunity cost of producing more clothing? If you are on the curve, is it possible to increase production of one good without decreasing the production of the other?arrow_forward
- A farmer produces both green beans and corn. The farmer must give up 31 bushels of corn to get 7 more bushels of green beans. If the rate of transformation (or tradeoff) between the two goods is constant, then the opportunity cost of 1 bushel of green beans in terms of bushel of corn is? The result should be given to two decimal places in absolute value (e.g if the result is 3.678, write 3.68, if the result is -3, write 3.00.) Your Answer:arrow_forwardThe graph to the right depicts an economy, Home, that produces both flowers and soybeans. Flowers are the labor intensive good and soybeans are the land intensive good. Home presently exports flowers. The graph also indicates Home's optimal point of production, X. Suppose that Home has acquired more land in which it can now produce 12 units of soybeans if all land were devoted toward its production. Using the three-point curved line drawing tool, draw the new production possibilities frontier that indicates this biased growth of land in Home. Properly label this curve. Carefully follow the instructions above and only draw the required object. The growth biased toward land causes OA. export-biased growth. O B. a decrease in the relative price of flowers. OC. a rightward shift of the relative supply curve. O D. import-biased growth. 16- 15- 14- 13- 12- 11- 10- 9- 7- 6- 5- Growth of a Factor Soybean output VV TT 7 8 9 10 11 12 13 14 15 16 Flower output €arrow_forwardIf a family spends its entire budget in a given time frame, the family can afford either 95 cans of vegetables or 40 frozen dinners. Assuming the family spends its entire budget on just these two goods, what is the opportunity cost of a can of vegetables in the time frame?arrow_forward
- 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: Find the opportunity cost for hamburgers and pancakes for Bob and Jake.arrow_forward6. The opportunity cost of shifting production choices The following graph shows the production possibilities curve (PPC) of an economy that produces clothing and oil. The black points (plus symbols) represent three possible output levels in a given month. You can click on the points to see their exact coordinates. 32 28 PPC 24 20 16 50 100 150 200 250 300 350 400 OIL (Millions of barrels) CLOTHING (Thous ands of pie ces)arrow_forwardThe production possibilities frontier (PPF) is a simplified economic model that illustrates the different combinations of two products that an economy can produce given the resources it has available. Assume the country of Turkey can produce only apples or oranges and answer each of the following questions A if a flood destroyed 20% of the farmland used to grow apples and oranges, which direction will Turkey's PPF shift /your answer should be "outwards" or "inwards") and why? B. Turkey decides to begin increasing, the production of oranges. Explain the implications of this using the term "opportunity cost" C An advancement in organic pesticide has allowed for less fruit to be damaged by pests. Explain how this change would alter the PPF.arrow_forward
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