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Homework answers / question archive / George Washington University - ECON 1011 THE GEORGE WASHINGTON UNIVERSITY Department of Economics Economics 011 Prof
George Washington University - ECON 1011
THE GEORGE WASHINGTON UNIVERSITY
Department of Economics
Economics 011 Prof. Steve Suranovic
Section 14 Fall 2012
Problem Set #2 – Answers
Answer all of the following questions from the book and those below. HW #2 is due in class on Wednesday Feb 22nd .
A. Questions from Text and Readings
R&T Chapter 2-5 (online), Chapter 2.4 Review and Practice (in printed textbook); Concept Problems 2, 3;
(for Extra Practice complete Numerical Problems 1 – 5 (not required for HW1))
CP2. Why does the downward-sloping production possibilities curve imply that factors of production are scarce?
CP3 In what ways are the bowed-out shape of the production possibilities curve and the law of increasing opportunity cost related?
a. What is Reggie’s productivity in wheat production? Include units.
b. Demonstrate that Reggie has the absolute advantage in wheat production using productivity comparisons.
c. Demonstrate that Reggie has the absolute advantage in corn production using unit labor requirement comparisons.
d. What is the opportunity cost of corn production for Reggie?
e. What is the opportunity cost of wheat for Nigel?
f. Use the opportunity cost method to determine who has the comparative advantage in corn.
g. Use the relative productivity method to determine who has the comparative advantage in wheat.
a. Who has the absolute advantage in the production of coffee?
b. What is Simi’s opportunity cost of coffee production?
c. Who has the comparative advantage in coffee production?
c. How much more productive is Olga in orange production than Irina?
5. In the late 1950s as a part of the Great Leap Forward campaign in China, Mao Zedong wanted to expand steel production in the country by mobilizing the rural masses to produce steel using backyard furnaces supplied with collected scrap metal. Use the economic argument in this chapter to explain why the effort was an abysmal failure.
watching the Super Bowl, the demand shifter in this case is the number of
3. Complements: a, b, e, f, g, j. In each of these cases (e.g., peanut butter and jelly) the goods are likely to be used in conjunction with each other. Whether this holds for a specific individual ism, of course, an empirical question.
C. Jeopardy Style Short Answer Questions
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1. In the pure exchange model, the two |
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traders experience diminishing marginal utility in consumption. Is this an assumption or an implication of the model? |
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2. In the pure exchange model, the utility of |
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both traders rises because of trade. Is this an assumption or an implication of the model? |
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3. In the exchange model with production, |
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there are there are only two traders. Is this assumption more likely to be consequential to the result or inconsequential? |
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4. In the pure exchange model, the traders are assumed to have perfect information |
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about their preferences. Is this assumption more likely to be consequential to the result or inconsequential? |
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5. The exchange model with production assumes that the individuals can only |
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produce two goods. Is this assumption included more because it reflects reality or more because it simplifies the model? |
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6. The exchange model with production assumes that the individuals have different |
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productive capabilities. Is this assumption included more because it reflects reality or more because it simplifies the model? |
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7. If Maria’s unit-labor requirement is 4 hours per pound of cheese and 8 hours per |
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gallon of wine, while Vincent’s unit-labor requirement is 8 hours per pound of cheese and 6 hours per gallon of wine, who has the absolute advantage in cheese? Why? |
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8. If Maria’s unit-labor requirement is 4 hours per pound of cheese and 8 hours per |
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gallon of wine, while Vincent’s unit-labor requirement is 8 hours per pound of cheese and 6 hours per gallon of wine, who has the absolute advantage in wine? Why? |
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9. If Maria’s unit-labor requirement is 4 hours per pound of cheese and 8 hours per |
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gallon of wine, while Vincent’s unit-labor requirement is 8 hours per pound of cheese and 6 hours per gallon of wine, who has the comparative advantage in cheese? Why? |
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10. If Maria’s unit-labor requirement is 4 hours per pound of cheese and 8 hours per |
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gallon of wine, while Vincent’s unit-labor requirement is 8 hours per pound of cheese and 6 hours per gallon of wine, who has the comparative advantage in wine? Why? |
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11. If Ben’s unit-labor requirement is 4 hours per pound of cheese and 8 hours per |
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gallon of wine, while Kyle’s unit-labor requirement is 4 hours per pound of cheese and 12 hours per gallon of wine, who has the absolute advantage in cheese? Why? |
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12. If Ben’s unit-labor requirement is 4 hours per pound of cheese and 8 hours per |
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gallon of wine, while Kyle’s unit-labor requirement is 4 hours per pound of cheese and 12 hours per gallon of wine, who has the comparative advantage in cheese? Why? |
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13. Suppose Ben’s unit-labor requirement is 4 hours per pound of cheese and 8 hours per gallon of wine, while Kyle’s unit-labor requirement is 4 hours per pound of cheese and 12 hours per gallon of wine. Suppose Ben and Kyle each work 48 hours per week. Plot both workers’ one week PPF in an Edgeworth Box diagram. Indicate on the diagram the production point if both workers specialize in their comparative advantage good. |
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14. Based on the adjoining PPF diagrams for Simi and Alex, each working for one |
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day, answer these questions
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15. Yes or No, is it possible for one person to NOT have a comparative advantage in any good in a two good economy? |
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16. Always, Never or Sometimes, if a person has an absolute advantage in a good will she have a comparative advantage in that good? |
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17. Always, Never or Sometimes, in a two good two person economy, if one person |
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has a comparative advantage in a good, will the other person have a comparative advantage in the other good? |
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18. Suppose a person’s opportunity cost of |
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cheese production is 1 gal of wine. If the terms of trade in the market is 2 gal per lb of cheese, should this person produce more or less cheese? Explain. |
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19. If it takes a silversmith (1/6) hour of |
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work to produce a silver fork, what is the worker’s productivity? (include units) |
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20. If a worker’s unit-labor requirement is 2 hours per pound of cheese and 4 hours per |
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gallon of wine, how much wine and cheese can he produce if he splits his 40-hour work week equally between the two products? (include units) |
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21. If Tom’s productivity is 20 spoons per day or 60 knives per day and Fred’s productivity is 30 spoons per day or 60 knives per day, who has the comparative advantage in spoons? Why? |
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22. If a worker’s productivity is 1000 pins per day or 20 model airplanes per day, plot the 5-day work week PPF. |
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23. Using the graph in the previous answer, indicate the opportunity cost of airplane production. (include units) |
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24. term used to describe an official document that substantiates a person’s ownership of a car or home. |
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25. It is often said that possession is this percentage of the law. |
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26. John Locke said that if someone applies this to natural resources the product becomes her property. |
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27. Identify two methods that can signal that previously unowned property is now yours. |
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28. name for a common type of involuntary transfer |
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29. this government system is used in a country or state to determine the guilt of those who violate property rights |
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30. Who is the most likely owner of the shoes your roommate is wearing? |
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31. Who is the most likely owner of Tom’s baseball cap? |
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32. Who is the most likely owner of the top of Pike’s peak in the Rocky mountains? |
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33. Name given to a second good that a |
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consumer might buy if the first good is not available or is too expensive |
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34. Name given to a second good that a |
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consumer might use at the same time as the first good. |
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35. Name two substitute goods or services for a magazine |
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36. Name two complement goods for a magazine |
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37. Of increase, decrease or stay the same, |
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this would happen to demand for gasoline today if consumers suddenly expect the price to increase substantially next week. |
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38. Of increase, decrease or stay the same, |
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this would happen to demand for big screen TVs today if consumers expect a recession to begin soon. |
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39. Of increase, decrease or stay the same, |
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this would happen to demand for shrimp today if the wages of shrimp workers rise. |
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40. Latin phrase used to indicate that all |
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other variables in the model are assumed to remain at their original values. |
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41. The demand curve for tea normally plots |
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the quantity demanded at every price of coffee, price of tea, price of milk, or income level? |
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42. Of shift the curve or move along the |
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curve, this would occur to the demand curve for peanuts if the price of popcorn increases |
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43. Of shift the curve or move along the |
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curve, this would occur to the demand curve for popcorn if the price of popcorn increases |
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