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Problems - Week 2 - Problems Chapter 2 Problem 1.5, page 58...

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Problems - Week 2

Problems - Week 2 - Problems Chapter 2 Problem 1.5, page 58...

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Problems Chapter 2
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ONE OF THE TRADE-OFFS BMW FACES IS BETWEEN SAFETY AND GAS MILEAGE. FOR EXAMPLE, ADDING STEEL TO A CAR MAKES IT SAFER BUT ALSO HEAVIER, WHICH RESULTS IN LOWER GAS MILEAGE. DRAW A HYPOTHETICAL PRODUCTION POSSIBILITIES FRONTIER THAT BMW ENGINEERS FACE THAT SHOWS THIS TRADE-OFF Problem 1.5, page 58
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Answer
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IN THE WEALTH OF NATIONS, ADAM SMITH WROTE THE FOLLOWING (BOOK 1, CHAPTER II):”IT IS NOT FROM THE BENEVOLENCE OF THE BUTCHER, THE BREWER, OR THE BAKER THAT WE EXPECT OUR DINNER, BUT FROM THEIR REGARD TO THEIR OWN INTEREST.” WHAT DID HE MEAN BY THIS? Problem 3.8 page 62
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Answer Adam Smith was making the “invisible hand” argument that, in pursuing their self-interest, business people end up producing the goods and services most desired by consumers.
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USING THE SAME AMOUNT OF RESOURCES, THE UNITED STATES AND CANADA CAN BOTH PRODUCE LUMBERJACK SHIRTS AND LUMBERJACK BOOTS , AS SHOWN IN THE FOLLOWING PRODUCTION POSSIBILITIES FRONTIERS. Problem 2.4 Pages 60-61 12 4 3 3 United States Q boots 6 3 3 Canada 6 Q boots
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Questions a. Who has a comparative advantage in producing lumberjack boots? Lumberjack shirts?
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