ECON HW 1 - TRANDEL ECON 2106 HW#1 Answers(graphs were...

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TRANDEL ECON 2106 HW #1 Answers (graphs were drawn in) 1. (Option A) – If the bill is going to be separated, then the diner is responsible for exactly what they order and only what they order. If it is combined and divided up equally between all the diners, then the diner will most likely consider the prices of other diner’s meals. If his or her own meal is less expensive than the average price of a meal, then the diner will wind up paying for part of another diner’s meal. Likewise if the diner’s meal is more expensive than the average price, then someone else at the table will be paying for part of the diner’s meal. 2. a. The best possible trade for Kate is to trade away 2 units of food and get back 3 units of clothing b. The best possible trade for Regina is to give up 1 unit of clothing and get back 1 unit of food c. The best possible trade for Lily is to give up 2 units of food to get one unit of clothing 3. As transportation costs fell, colonial Americans probably began to trade any surplus of food or clothing they had with each other. As incomes began to rise because of this, those that realized they were better at farming specialized in farming and just traded for clothes, and those that were better at making clothes specialized in clothes and just traded for food. Americans were able to excedd their former Production Possibilities Frontier through specialization. That surplus could then be sold since transportation costs had lowered and therefore increased incomes of the colonist.
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