ps2 - ECON1001 Tutorial2...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON 1001 Tutorial 2
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Q.1 Suppose that in one hour Lou and Alex can do the  following: Which of the following is true?  A) Lou has both an absolute and comparative advantage over Alex in both tasks.  B) Alex has a comparative advantage over Lou in cleaning.  C) Lou has a comparative advantage over Alex in cleaning.  D) Lou has a comparative advantage over Alex in cooking.  E) Both (b) and (d) are true.  Ans: C Alex Lou Whole hour cleaning  3 rooms  5 rooms  Whole hour cooking  3 meals  4 meals  0.5 hour, each  1.5 rooms, 1.5 meals  2.5 rooms, 2 meals 
Background image of page 2
Who has absolute advantage? Compare productivity base on same resources (1 hour) Abs adv in CLEANING  == >Lou Abs adv in COOKING ==  Lou Possible to have abs adv on BOTH? Alex Lou 1hour cleaning  3 rooms  5 rooms  1hour cooking  3 meals  4 meals  0.5 hour, each  1.5 rooms, 1.5 meals  2.5 rooms, 2 meals 
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Alex Lou 1hour cleaning  3 rooms  5 rooms  1hour cooking  3 meals  4 meals  0.5 hour, each  1.5 rooms, 1.5 meals  2.5 rooms, 2 meals  To ‘produce’ 1 room, To ‘produce’ 1 meal, Alex = sacrifice 1 meal Alex = sacrifice 1 room Lou = sacrifice 0.8 meal Lou = sacrifice 1.25 room Who has comparative advantage? Compare OPPORTUNITY COST Comp adv in CLEANING == > Lou Comp adv in COOKING == > Alex Possible to have COMPARATIVE adv on BOTH? NO!? WHY?
Background image of page 4
Q.2 Alex and Lou have worked out an efficient  arrangement.  Under that arrangement, A) Alex and Lou each spend a half hour on cooking and a half hour  on cleaning.  B) Alex spends all of his time on cleaning, while Lou does all the  cooking.  C) Lou does all of the cleaning and half of the cooking.  D) Lou does all of the household chores.  A) Lou spends all of his time on cleaning, while Alex does all the  cooking  Ans: E
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
How much TOTAL OUTPUT if A) Alex = 1.5 R+1.5 M    Lou= 2.5 R+2 M total = 4 R+3.5M  B) Alex = 3 R                 Lou= 4M total = 3 R+4 M  A) Lou: all cleaning+ half cooking.   how much time does it take? Any info?  comparable to other options!? D) Alex = 0 R+0 M           Lou= 2.5 R+ 2M total = 2.5 R+2 M  E)   Alex = 3 M           Lou= 5 R total = 5 R+3 M
Background image of page 6
Efficient = econ surplus is maximized = cannot increase output of one good without reducing the output of another good ‘efficient’ arrangement = largest total output facing constraint (1 hour) can be achieved by specialization Option Total Output A 4R+3.5M B 3R+4M
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 27

ps2 - ECON1001 Tutorial2...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online