ECON 102 Study Guide - Quiz Guide: Absolute Advantage, Opportunity Cost, Comparative Advantage

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turquoisegnu128

28 Sep 2018

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It would take mark 1/2 month to produce 20 bats. In that time, mark could have produced 25 baseballs. Mark can produce 50 baseballs in a month and katie can produce 60 baseballs in a month. It would take katie 2/3 of a month to produce 20 bats. In that time, katie could have produced 40 baseballs. Mark can produce 60 baseballs in a month and katie can produce 42 baseballs in a month. Mark can produce 40 bats in a month and katie can produce 30 bats in a month. ______________has the absolute advantage in the production of bats, and _____________ has the comparative advantage in the production of bats. Mark can produce more bats in a month than katie can, so mark has the absolute advantage in the production of bats. Also, katie"s opportunity cost of producing a given number of bats is lower than. Mark"s, so katie has the comparative advantage in the production of bats.

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Problem
#1 ( Budget Lines) :
Suppose that Russ has budgeted $20 a month to buy candy bars, music downloads, or
some combination of each. If Russ buys only candy bars he can obtain 40 bars a month; if
he buys only downloads, he can buy 20 a month.
1. What is the price of a candy bar?
2. What is the price of a music download?
3. What is the opportunity cost of a music download?
4. What is the opportunity cost of a candy bar?
5. Would the opportunity cost of each good change if Russ decided to increase his
monthly budget to $30 for the two items?
Problem #2 ( Production Possibilities ):
Suppose that a nation's production possibilities can be represented by the table below:
Production Alternatives

	Product Alternatives
Products	A	B	C	D	E
Food	0	4	8	12	16
Clothing	20	18	14	8	0

Products A B C D E
Food 0 4 8 12 16
Clothing 20 18 14 8 0
1. What is the maximum amount of food this economy can produce? How much clothing
can it produce at this point?
2. If the economy is producing at alternative C, what is the cost of one more unit of
food?
3. If the economy is producing at alternative C, what is the cost of one more unit of
clothing?
4. Is this economy subject to the law of increasing opportunity costs? How can you tell?
5. Suppose the economy is currently producing 4 units of food and 16 units of clothing.
Is this economy producing efficiently?

ceriseguinea-pig206

With current technology, suppose a firm is producing 400 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60, $60, and $20, respectively. If the firm can sell these 400 loaves at $2 per unit, what is its total revenue? Its total cost? Its profit or loss? Will it continue to produce banana bread? If this firm

indigohound210

Problem 1

Below is a production possibilities table for consumer goods (food) and capital goods (machinery). Graph the data using Excel and then answer the following questions.

	A	B	C	D	E	F
FOOD	0	10	20	30	40	50
MACHINES	150	140	120	90	50	0

(a) What are the specific assumptions that underlie the production possibilities curve?

(b) What would be the cost of more food if the economy is at point C? What would be the cost of producing more machinery? How does the shape of the production possibilities curve reflect the law of increasing opportunity costs?

(c) What if this hypothetical economy were producing only 9 food and 130 machines and it was depicted by this production possibilities table and curve? What conclusions could be drawn about this economy's resource utilization?

(d)Can this economy produce outside its current production possibilities? How can technological changes affect the production possibilities curve? How can international trade permit consumption above its production possibilities curve?

byzantiumcrocodile871

ECON 102 Study Guide - Quiz Guide: Absolute Advantage, Opportunity Cost, Comparative Advantage

ECON 102 Full Course Notes

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