122-ps1 - METU Department of Economics ECON 122 Erkan ERDL...

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1 METU Department of Economics ECON 122 Erkan ERD Đ L 2007-2008 Spring PROBLEM SET # 1 (Chapter 1-3) 1 . Graph the functions (1) y = 8 + 3x (2) y = 8 – 3x (3) y = 8 - 6x (4) P=8+3Q (5) Q=10-2P a. Find the slopes and intercepts of the functions above. b. Explain the relationship between the dependent and the independent variables x and y for each equation. 2 . The following table shows output per hour for Martha and Stewart who make gift baskets and potholders: Output per Hour Martha Stewart Gift Baskets 10 8 Potholders 20 12 a) What is the opportunity cost of a gift basket for Martha? What is the opportunity cost of a gift basket for Stewart? Who has a comparative advantage in producing gift baskets? How can you tell? b) What is the opportunity cost of a potholder for Martha? What is the opportunity cost of a potholder for Stewart? Who has an absolute advantage in producing potholders? Who has a comparative advantage in producing potholders?
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