Homework answers / question archive / Q1) suppose that a self sufficient household produces (and consumes) corn and potato

Q1) suppose that a self sufficient household produces (and consumes) corn and potato

Economics

Share With

---

Q1) suppose that a self sufficient household produces (and consumes) corn and potato. the current marginal rate of transformation is 2 pounds of potato for each pound of corn. If the international price of potato duplicates what should happen with the production level of corn of this household?

 

a. we can not determine it, we need more information

b. it should not change

c. it should decrease

d. it should increase

 

Q2) suppose that a self sufficient household produces (and consumes) corn and potato. The current marginal rate of transformation is 2 pounds of potato for each pound of corn. How many pounds of corn is this household willing to give up in order to consume one additional pound of potato while keeping their utility level constant?

 

a. 2

b. 0.5

c. we can not determine it, we need more information

d. 1

 

Q3) suppose that an agricultural household produces (and consumes) corn and potato. This household can buy and sell in the market its production. the current price of potato is $6/pound and the current price of corn is $3/pound. If the household is operating in a point of their PPF where the marginal rate of transformation is 1.5 (reducing the production of potato by 1 pound increases the production of corn by 1.5 pounds) what should the household do to maximize their profits? 

 

a. nothing, the household is already in the optimal production bundle

b. we can not determine it. we need more information

c. increase the production of corn

d. increase the production of potato