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ECON-UA 2 Quiz: Sep 11

2937 views4 pages
pinkmoose758
9 Nov 2016
School
New York University
Department
Economics
Course
ECON-UA 2
Professor
Bhiladwalla Maharukh

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Document Summary

Chapter 1: two friends, rachel and joey, enjoy baking bread and making apple pies. Rachel takes 2 hours to bake a loaf of bread and 1 hour to make a pie. Joey takes 4 hours to bake a loaf and 4 hours to make a pie. Joey"s opportunity cost of baking one loaf of bread: 1 bread x 4hrs/1bread x 1pie/4hrs =1 pie. Rachel"s opportunity cost of baking one loaf of bread: Joey makes the bread; rachel makes the pie (specialize in their comparative advantage goods: the price of a loaf of bread can be expressed in terms of an apple pie. Rachel makes 2 pies per loaf and joey makes 1 pie per loaf. A nation has comparative advantage in producing a good if it can produce it at a lower opportunity cost than some other nation. Greatest total production of every good or service. When nations shift production toward their comparative advantage goods and trade with each other.

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Related Questions

Pat and Kris are roommates. They spend most of their time studying (of course), but some time for their favorite activities: making pizza and brewing root beer. Pat takes 4 hours to brew a gallon of root beer and 2 hours to make a pizza. Kris takes 6 hours to brew a gallon of root beer and 4 hours to make a pizza.

a. What is each roommate's opportunity cost of making a pizza? Who has the absolute advantage in making pizza? Who has the comparative advantage in making pizza?

b. If Pat and Kris trade foods with each other, who will trade away pizza in exchange for root beer?

c. The price of pizza can be expressed in terms of gallons of root beer. What is the highest price at which pizza can be traded that would make both roommates better off? What is the lowest price? Explain.

I am working on this question related to chapter 3 in Mankiw's Microeconomics book. I am having a tough time grasping the process of economics. So I'm listing the question and would like someone to describe the process to calculate this question.

1. Gary and Diane must prepare a presentation. As part of their presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would take Gary 10 hours to do the required calculations and 10 hours to prepare the slides. It would take Diane 12 hours to do the calculations and 20 hours to prepare the slides.

a. How much time would it take the two to complete the project if they divide the calculations equally and the slides equally?  My inclination is to divide the amount of time each can do and find the average? So it would take them 11 hours for the calculations and 15 hours to produce the slides?? Is this the correct thought process?

b. How much time would it take the two to complete the project if they use comparative advantage and specialize in calculating or preparing slides? Here - does Diane have the lower opportunity cost as she is realizing less time to complete the project because it takes less time for Gary to produce calculations and slides? So she has a comparative advantage?

c. If Diane and Gary have the same opportunity cost of $5 per hour, is there a better solution than for each to specialize in calculating or preparing slides? The only other solution I can apply here is: Gary is quicker at both calculating and preparing slides, but Diane is only slightly slower in preparing calculations but much longer at preparing slides - so give the slides to Gary and the calculations to Diane? How do I present this?

PART B – Questions 10 – 27 Use the following assumptions to answer all questions: • There are three countries – Argentina, Britain and Canada. • Each country produces and consumes two kinds of goods – crude oil and beef. • All countries make their goods from a single type of input – labor – and each country has 700 hours of labor available to produce crude oil and beef. • Each country demands 5 (five) barrels of crude oil. This assumption simply means that a country must have exactly 5 barrels of crude oil – it may produce them domestically, it may import them from abroad, or it makes some domestically and imports the rest. • Countries produce goods using the technology described in the table below Technology Hours of labor needed to produce one unit of good Using the above assumptions, answer the following questions: • Calculate the quantities of crude oil and beef produced in each country in autarky (when they do not trade and each country produces its own crude oil and beef) • Order the countries according to their absolute advantage in production of crude oil • Order the countries according to their absolute advantage in production of beef • Consider the case where countries are free to specialize and trade. In the table below calculate each country’s opportunity cost of producing one unit of each good. • Calculate the quantities of crude oil and beef produced in each country, consistent with the country’s comparative advantage. Based on the above calculations, answer questions 10 through 27: Consider autarky, when countries do not trade and each country produces its own crude oil and beef. 10. In autarky, Argentina produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 11. In autarky, Britain produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 12. In autarky, Canada produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 13. In autarky, Argentina produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 14. In autarky, Britain produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 15. In autarky, Canada produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 16. Country of _____ has absolute advantage in production of crude oil. a. Argentina b. Britain c. Canada d. No country 17. Country of _____ has absolute advantage in production of beef. a. Argentina b. Britain c. Canada d. No country Consider effects of specialization, when countries are allowed to trade. 18. When countries specialize, Argentina produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 19. When countries specialize, Britain produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 20. When countries specialize, Canada produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 21. When countries specialize, Argentina produces _____ pounds of beef. a. 0 b. 700 c. 150 d. 400 22. When countries specialize, Britain produces _____ pounds of beef. a. 0 b. 700 c. 150 d. 400 23. When countries specialize, Canada produces ____ pounds of beef. a. 0 b. 700 c. 150 d. 400 24. Country of __C___ has comparative advantage in production of crude oil. a. Argentina b. Britain c. Canada d. No country 25. Country of ___A__ has comparative advantage in production of beef. a. Argentina b. Britain c. Canada d. No country 26. Countries gain from trade because specialization increases ____. a. Trade deficit b. Unemployment c. Efficiency d. Inflation 27. Countries should trade with trading partners that _____. a. Are equally technologically advanced b. Use superior technology in every industry c. Use less advanced technology in every industry d. Use different technologies, because trade benefits all