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3. Country A has 1,200 units of labour available. It can produce two goods, apples and bananas. The unit labour requirement in apple production is 3, while in banana production it is 2. Country B has a labour force of 800. B’s unit labour requirement in apple production is 5, while in banana production it is 1. a)Graph Country A’s and B’s production possibility frontier

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Related questions

Country A has 3300 labour units and can produce manufactures and food. A’s producers take 2 units of labour to produce a unit of manufactures and 5 units to produce a unit of food. Country B has 2100 units of labour and takes 5 units of labour to produce a unit of manufactures and 7 units to produce a unit of food. At what price of food in terms of manufactures would A and B respectively supply food? Would trade take place between A and B in David Ricardo’s world? How many manufactures could A supply?

QUESTION 1

  1.  

    Which of the following statements about a production possibility curve for a country are true?

    Which
    of
    the following statements about a production possibility curve
    for a country
    are
    true?
    a.
    Anywhere outside the PPC is a possibility for production
    b.
    PPCs are downward sloping – there is a tradeoff between the environment and goods 
    c.
    PPCs will always shift in for future generations 
     
    d.
    All points on the PPC give the same amount of production of the two goods.

QUESTION 2

  1. Suppose there are two people: Anna and Bob. Anna’s demand curve for donuts is P= 10 - Qa . Bob’s demand curve for donuts is: P= 10- 2Qb.

    Their joint (aggregate) marginal benefit from donuts can be described by the function: MB =  - Q.
    Their total benefit from 15 donuts is .
    Write your answers in decimals, rounding to two decimal places.  Ex DO NOT USE fractions like 1/3 or .3, but instead .33.

QUESTION 3

  1. Suppose two bakeries produce donuts. Firm A’s supply curve is P = 20 + 2Qa. Firm B’s supply curve is: P = 20 + Qb. 
    Their joint supply curve is:  + Q
    Their total cost of producing 30 donuts is: 
    Write your answers in decimals. Again -- round to two decimal places.

Consider the economy of the country of “Apple Island”. There are two firms in this economy, “Apple Co.” and “Squashed Apple Co.” Apple Co. grows apples on its apple farm, employing workers. It sells $50 of apples to Squashed Apple Co. and $40 of apples to consumers for the consumers to eat. It also keeps $10 of apples in inventory. Apple Co. pays $70 wages to its workers and keeps the remainder as profits. Squashed Apple Co. owns a special flat rock that allows it to squash the apples that it buys from Apple Co. into a flattened apple pancake that the consumers seem to like. It buys $50 of apples from Apple Co., squashes them, and then sells $100 of squashed apples to consumers. Squashed Apple Co. pays $10 in wages to its workers, keeping the remainder in profits.

(a) (30 marks) Calculate GDP in this economy using 3 methods: expenditure method, income method and value-added method.

(b) (5 marks) Does “Squashed Apple Co.” use only labour to produce its squashed apples, or labour and capital? Explain.

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