Answers%20to%20Week%203%20TUTORIAL%203_2

Answers%20to%20Week%203%20TUTORIAL%203_2 - WEEK 3 TUTORIAL...

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WEEK 3 TUTORIAL 3 COMPARATIVE ADVANTAGE: THE BASIS FOR TRADE Reading Text: Ch 2, and Ch 8 (pp204-210 Ch 2 Problems: 1, 6, 7, 9, 10 Ch 8; Review Questions 1, and 4 Problems: 2 and 3 Problems 1 In the time it takes Ted to wash a car he can wax one-third of a car. Thus, the opportunity cost to Ted of washing one car is one-third of a wax job. In the time it takes Dan to wash a car, he can wax one-half of a car; the opportunity cost to Dan of washing one car is one-half of a wax job. Because Ted’s opportunity cost of washing a car is lower than Dan’s, Ted has a comparative advantage in washing cars. 6 Point a is unattainable. Point b is efficient and attainable. Point c is attainable but inefficient. 0 32 64 Dresses per day Loaves of bread per day a b c 32 16 24 28 16 18 7. The new machine doubles the value of the vertical intercept of Helen’s PPC, but leaves the horizontal intercept unchanged.
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0 32 64 Dresses per day Loaves of bread per day 64 9. The upward rotation of Helen’s PPC means that, for the first time, she is now able to produce at any of the points in the shaded region. Not only has her menu of opportunity increased with respect to dresses, but it has increased with respect to bread as well. 10 a The maximum possible coffee output is 36 kilos per day (12 from Peng, 24 from Jara). b Their maximum possible output of nuts is also 36 kilos per day (12 from Jara, 24 from Peng). c Peng should be sent to pick nuts, since his opportunity cost (half a kilo of coffee per kilo of nuts) is lower than Jara’s (two kilos of coffee per kilo of nuts). Since it would take Peng only one hour to pick four kilos of nuts, he can still pick 10 kilos of coffee in his five working hours that remain. Added to Jara’s 24 kilos, they will have a total of 34 kilos of coffee per day. d Jara should be sent to pick coffee, since her opportunity cost (half a kilo of nuts per kilo of coffee) is lower than Peng’s (two kilos of nuts per kilo of coffee). It will take Jara two hours to pick eight kilos of coffee, which means that she can still pick eight kilos of nuts, giving a total between them of 32 kilos per day of nuts. e To pick 26 kilos of nuts per day, Peng should work full time picking nuts (24 kilos per day) and Jara should spend one hour per day picking nuts (two kilos per day). Jara would still have five hours available to devote to coffee picking, so she can pick 20 kilos of coffee per day.
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Ch 8 Review Questions 1 The figure below shows the PPC for a four-worker economy. Point A, the vertical intercept, shows the maximum number of hot dogs the economy can produce (with all four workers producing only hot dogs). Similarly, point B, the
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This note was uploaded on 08/06/2011 for the course FIN 3616 taught by Professor Henry during the Three '11 term at University of New South Wales.

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Answers%20to%20Week%203%20TUTORIAL%203_2 - WEEK 3 TUTORIAL...

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