problem set 1 solutions

# problem set 1 solutions - Econ 101 Prof.Schuler Sring 2008...

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Econ 101 Prof.Schuler Sring 2008 Problem Set 1 Suggested Solutions Q.1.a Opportunity Cost of reading 200 pages of FB = 333.3 pages of Da Vinci Code. b. c. New Opportunity cost of reading 200 pages of FB = 250 pages of The Da Vinci Code

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Q.2 a. Opportunity cost of 1 unit of wheat for Dwight =1/2 units of pork Opportunity cost of 1 unit of wheat for Michael =4 units of pork b. Opportunity cost of 1 unit of pork for Dwight =2 units of wheat Opportunity cost of 1 unit of pork for Michael =1/4 units of wheat c. Dwight has a comparative advantage in the production of wheat and Michael has a comparative advantage in the production of Pork. d. With trade, we can see the joint PPF in the diagram above.
Suppose we are the point A =(16,10) . If we split production of Wheat and Pork between Dwight and Michael, they are both better off than in the no trade situation. The allocation (8,5) is unattainable by their individual PPF’s. Q.3 Number of marketing initiatives Total benefit Marginal Benefit 1 \$ 10 million - 2 \$ 16 million 6 3 \$ 19 million 3 4

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