ECON 247 Assignment 1A.docx - Assignment 1A(100 marks total...

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Assignment 1A (100 marks total) Assignment 1 should be submitted after you have completed Units 1 through 5 (Chapters 1 to 12). It is worth 10% of your final grade. Insert your answer to each question below the question. Show your calculations. None of the assignment questions require you to provide a graph. 1. Identify each of the following topics as being part of microeconomics or macroeconomics. (5 marks) a. the impact of a change in consumer income on the purchase of luxury automobiles -Microeconomics b. the effect of a change in the price of Coke on the purchase of Pepsi - Microeconomics c. the impact of a war in the Middle East on the rate of inflation in Canada -Macroeconomics d. the effect of pollution taxes on the Canadian copper industry -Microeconomics e. the effect of a balanced-budget policy on economic stability -Macroeconomics 2. Which of the following statements are positive and which are normative? (4 marks) 3. a. Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns and why? (4 marks) Absolute advantage refers to the producer who can produce a product at a lower cost in terms of the resources used in production. Comparative advantage refers to the producer who can produce a product at a lower opportunity cost. Comparative advantage is the principle upon which trade patterns are based. Comparative advantage is based on opportunity cost, and opportunity cost measures the real cost to an individual or country of producing a particular product. Opportunity cost is therefore the information necessary for an individual or nation to determine whether to produce a good or buy it from someone else. ECON 247v9 Assignment 1A March 7, 2014
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b. Suppose Farmer and Rancher trade only with each other and they both produce the same two goods: meat and potatoes. Given their resources, Farmer can either process 10 kg of meat per day or produce 40 kg of potatoes; Rancher can either process 10 kg of meat per day or produce 8 kg of potatoes.
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