ECO 304K Study Guide - Final Guide: Yogurt, Candela, Economic Equilibrium

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2 Oct 2018

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ECO 304K Full Course Notes

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1: cost of tomatoes for kinsella is 3 peppers. Cost of tomatoes to macdonald is 8 peppers. Macdonald gives up more to produce tomatoes, so may trade with kinsella: slope is -3 from y intercept of 52 until kink at (4,40). Slope is -8 from kink to x intercept of 9: good deal for mcdonald since a tomato costs him 8 peppers and at this price can get a tomato for 2. If economy at this point on the ppf, kinsella must be producing 4 tomatoes and. Since he ends up consuming 2 tomatoes and 14 peppers, that means the trade was 2 tomatoes for 14 peppers. This trade also works for mcd since trading 14 peppers leaves him 40- 14 = 26 and he gets the 2 tomatoes he consumes. In b), producing more has lower opp. costs, this doesn"t make sense since shifting less efficient resources.

Related Questions

1. Which of the following demonstrates the law of demand?

a. Angela buys less gas for her car at $3.00 per gallon than at $3.50 per gallon.

b. Brenda buys more shirts at $25 each since she got a $1 per hour raise at work.

c. Natasha buys fewer Snickers at $0.85 each since the price of Kit Kats fell to $0.70 each.

d. Darlene sells more shirts since the price of shirts rose.

e. Eleanor buys more bran muffins at $1.50 each than at $2.00 each.

2. Assume that Columbia has a comparative advantage in coffee and Mexico has a comparative advantage in peppers. If the two countries specialize and trade according to comparative advantage:

a. Columbia will specialize in coffee production and export coffee.

b. more of each good can be consumed in both countries.

c. individuals in Columbia that produce peppers will be hurt because they will lose jobs.

d. All of the above

e. B and C, only

3. Which of the following statements is (are) correct?

(x) Ceteris paribus, the market price of a good will rise if demand increases.

(y) Ceteris paribus, the market price of a good will decrease if supply increases.

(z) Ceteris paribus, the market price of a good must increase if demand increases and supply decreases.

A. (x), (y) and (z)

B. (x) and (y) only

C. (x) and (z) only

D. (y) and (z) only

E. (z) only

crimsonalligator541

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

4. Your roommate Pat decides to help with the party. The amounts of brownies and cookies which can be produced in an hour (if all resources are devoted to that good) are shown by the following table:

YOU PAT

COOKIES PER HOUR 20 5

BROWNIES PER HOUR 40 20

Where both cookies and brownies are measured in units.

a. Who has an absolute advantage in producing brownies? Cookies?

b. For you, what is the opportunity cost of producing one brownie? Of one cookie?

c. For Pat, what is the opportunity cost of producing one brownie? Of one cookie?

d. Should you and Pat specialize? Who should produce what?

e. Suppose that you have so many guests that you have to split up the party into two rooms. You throw one party and Pat throws the other. What are the terms of trade? (At what rate would you each be willing to trade?)

f. Using graphs for both you and Pat, show that trade allows each of you to

achieve a point on your consumption possibilities curve which is greater than

your production possibilities curve. Be sure to label all curves and axes.

f. What is this principle called?

ECO 304K Study Guide - Final Guide: Yogurt, Candela, Economic Equilibrium

ECO 304K Full Course Notes

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