Test1Answers2007 - James E. Pesando Answers to Term Test 1...

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Answers to Term Test 1 (October 26, 2007): 1) You should not purchase the ticket. The benefit ($400) is less than the opportunity cost ($300 plus $200). 2a) The opportunity cost of producing one computer is 2 televisions in Canada (i.e. 10/5) and one television (i.e. 12/12) in Japan. 2b) Japan will export computers since Japan can produce computers at a lower opportunity cost. 2c) Japan would benefit from trade if the trade ratio were 1.5 televisions for any computers. The consumption possibilities available for a Japanese worker after trade would exceed the production possibility frontier. Computers 12 If the Japanese worker produced only computers and traded for televisions, the worker could consume 18 televisions. Japan Consumption PPF 12 18 Televisions 3a) The new market price is $0.50. If demand is perfectly inelastic, the full incidence of the tax falls on the consumer (who thus benefits from the removal of the tax). DD
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Test1Answers2007 - James E. Pesando Answers to Term Test 1...

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