Econ_101_HW_02_ch_2_3_Fall_2011

Econ_101_HW_02_ch_2_3_Fall_2011 - Economics 101-SFSU Fall...

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Economics 101--SFSU Name: Fall 2011 Due Thursday, September 8, 2011 2 points for each question for a total of 114 points. The extra 14 points are extra credit. Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fish, and have no other products. The following table shows the maximum annual output combinations of potatoes and fish that can be produced. Maximum Annual Output Options Quantity of Potatoes (Pounds) Quantity of Fish (Pounds) A 1000 0 B 800 300 C 600 500 D 400 600 E 200 650 F 0 675 Obviously, given their limited resources and available technology, as they use more of their resources for potato production there are fewer resources available for catching fish. Use this information to answer questions 1 to 11. 1. Draw a production possibilities frontier with potatoes on the horizontal axis and fish on the vertical axis. Illustrate the options A through F from the table on your diagram and label the points and provide numbers along the axes. 2. Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes?
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3. Explain your answer to question #2. 4. Draw the point indicating 500 pounds of fish and 800 pounds of potatoes on your diagram and label it G. Where does G lie relative to the production possibilities frontier? 5. Can Atlantis produce 300 pounds of potatoes and 200 pounds of fish? 6. Draw the point indicating 300 pounds of potatoes and 200 pounds of fish on your diagram and label it H. Where does H lie relative to the production possibilities frontier? 7. Would it be efficient for Atlantis to produce at point H? Why or why not? 8. What is the opportunity cost for Atlantis of increasing the annual output of potatoes from 200 pounds to 400 pounds?
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9. What is the opportunity cost for Atlantis of increasing the annual output of potatoes from 600 pounds to 800 pounds? 10. Explain why your answers to questions 8 and 9 are not the same. 11. What does your answer to question 10 tell you about the slope of the production possibilities frontier? According to the U.S. Census Bureau, in July 2006 the US exported aircraft worth $1 billion to China and imported aircraft worth $19,000 from China. During the same month, the US imported $83 million worth of men's pants from China, and the US exported $8000 worth of men's pants to China. Based only on this information, along with what you have learned about how trade is determined by comparative advantage, answer questions 12 to 15. 12. Which country most likely has the comparative advantage in aircraft production?
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Econ_101_HW_02_ch_2_3_Fall_2011 - Economics 101-SFSU Fall...

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