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PSLecture2 - Problem Set for Lecture 2 The Grand Design of...

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Problem Set for Lecture 2: The Grand Design of Rostow’s Take-Off Theory, the Kondratieff Cycle and the Golden Age of Capitalism: 1950 to 1973 [September 22, 2009] Note: Questions identified with a T may be discussed during tutorials and tests. 2.1 “Alexander is confused by the economic terms capital and investment . In Alexander’s perception investment means putting funds into the stock market and capital represents the value of the stocks one holds at a point of time.” Help Alexander. 2.2 “Arlene reads in the paper that a company in Asia produces both automobiles and rickshaws in a single plant. The company has recently shifted both labour and capital from the automotive division to the rickshaw division. As a result, the company now produces 1,000 more rickshaws and 25 fewer automobiles each week. Arlene then states that the opportunity cost of the transfer of labour and capital between the two divisions is 1,000 rickshaws.” T2.3 “Andrew passes through three phases during his first year at University. In the first phase, Andrew is to be found in the library every night and during all weekends. His first test result in calculus is 85%. However, during the weeks leading up to the next test, Andrew has found a new set of friends who like partying most days and every night. The grade on Andrew’s next calculus test falls to 55%. One could therefore conclude that the opportunity cost associated with increased partying for Andrew was a reduced grade in calculus. For the remainder of the academic year, Andrew adopts a new pattern: party heartily from Friday noon until Sunday night and then study hard during the week days and nights. Andrew’s final test result in calculus is 90%. One could conclude that during this final period, the opportunity cost associated with this higher grade was foregone enjoyment of partying during the week.” 2.4 “Audrey takes the position that in the production of steel, iron ore, coal and water l are just as important as labour and machinery. Audrey therefore argues that raw materials, energy and water requirements are necessary and therefore they should also be classified as factors of production.” T2.5 “Aster reviews the concave-to-the origin [pushed out from the origin] production possibilities curve for Palm Island which only produces coconuts and sun hats with factors capital and labour.
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