Principles_HWsolution_ch3

# Principles_HWsolutio - Suggested Answers for Mankiw Chapter 3 Problem 2 4 7 2 a Workers needed to make One T-shirt One Dozen Brownies 1/10 1/18

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Suggested Answers for Mankiw, Chapter 3, Problem 2, 4, 7 2. a. Workers needed to make: One T-shirt One Dozen Brownies U.S. 1/10 1/18 Mexico 1/10 1/10 b. See Figure 3. With 1 million workers and 10 T-shirts per worker, if either economy were devoted completely to T-shirts, it could make 10 million T-shirts. Because a U.S. worker can produce 18 dozen brownies, if the United States produced only brownies it would produce 18 million dozen. Because a Mexican worker can produce 10 dozen brownies, if Mexico produced only brownies it would produce 10 million dozen. These are the intercepts of the production possibilities frontiers shown in the figure. Note that because the trade-off between T-shirts and brownies is constant for both countries, the production possibilities frontiers are straight lines. Figure 3 c. Because a U.S. worker produces either 10 T-shirts or 18 dozen brownies, the opportunity cost of one T-shirt is 1 4/5 dozen brownies, which is 18 divided by 10. Because a Mexican worker produces either 10 T-shirts or 10 dozen brownies, the opportunity cost of one T-shirt is one dozen brownies, which is 10 divided by 10. Similarly, the U.S. opportunity cost of one dozen brownies is 5/9 T-shirt (10 divided by 18) and the Mexican opportunity cost of one dozen brownies is 1 T-shirt (10 divided by 10). This results in the following table: Opportunity Cost of: One T-shirt (in terms of dozens of brownies given up) One Dozen Brownies (in terms of T-shirts given up) U.S. 1 4/5 5/9 Mexico 1 1

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d. Neither country has an absolute advantage in producing T-shirts, because they are equally productive (the same output per worker); the United States has an absolute advantage in producing brownies, because it is more productive (greater output per worker). e.
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## This note was uploaded on 04/23/2010 for the course ECONOMICS 2312 taught by Professor William during the Spring '09 term at 東京大学.

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Principles_HWsolutio - Suggested Answers for Mankiw Chapter 3 Problem 2 4 7 2 a Workers needed to make One T-shirt One Dozen Brownies 1/10 1/18

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