ECO202: Tutorial Worksheet 11 1. Assume that typical consumers in Mexico and Canada buy the quantities and pay the prices indicated in the accompanying table: Bread Car Services Price Quantity Price Quantity Mexico 1 peso 400 7 pesos 300 Canada $1 1000 $2 2000 a. Compute Canadian consumption per capita in Canadian dollars. b. Compute Mexican consumption per capita in pesos. c. Suppose a peso is worth 20 cents ($0.20). Compute Mexican consumption per capita in dollars. d. Using the purchasing power parity method and Canadian prices and quantities (see the Focus box on page 263 of your text), compute Mexican consumption per capita in dollars. e. Under each of the methods used in (c) and (d), how much lower is the standard of living in Mexico than in Canada? Does the choice of method make a difference? 2. Consider the production function N K Y = . a. Compute output when K = 49 and N = 81. b. If both capital and labor double, what happens to output? c.
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