Unformatted text preview: Q1.
George and Carolyn each have 10 hours a day they can spend producing either cookies or
milkshakes as follows:
(per hour) Milkshakes
(per hour) George 5 10 Carolyn 2 6 Answer the following questions using the information above:
1. Circle the correct answer in each: (1 point each)
a. George/Carolyn has an absolute advantage in producing cookies.
b. George/Carolyn has an absolute advantage in producing milkshakes.
c. George/Carolyn has a comparative advantage in producing cookies.
d. George/Carolyn has a comparative advantage in producing milkshakes.
2. George and Carolyn will trade cookies for milkshakes with each other as long as the price of 1 cookie is
between __2___ and __3____ milkshakes. 2 points
3. If George and Carolyn marry (or merge) what will their PPF look like? Draw it here, with cookies on
the horizontal axis:
Answer: a kinked ppf with points at (70 cookies, 0 milkshakes) (50 C, 60 M) & (0 C, 160 M)
3 points: 1 for each point Q2.
Suppose that the USA and Japan have only 1 worker each. The following table summarizes the number of
movies or cars that each worker can produce in a week. Use this table to answer the following
Movies (per week)
Japan Cars (per week)
1 a. Which country has an absolute advantage in cars? _______USA (1 point)_____ a. Which country has a comparative advantage in cars? _______USA (1 point)_____ b. If Japan & USA merge what will their (weekly) PPF look like? Draw it here: PPF with one kink. Total: 4 points
1 for each point (7,0 2,3 0,4)
1 for labeling axis (movies, cars) c. Given this data, if Japan & USA merge what would be their joint supply of cars (in terms of
movies)? Draw it here:
Comment to R.I.s: working on Prof. Spiegel’s sections differed. But answer is the same.
A step function with 2 steps:
Step 1: 5/3 from 0 to 3 cars
Step 2: 2 from 3 to 4 cars.
Total: 3 points
1 for each step
1 for labeling axis. Q3.
Joe’s PPF 4
) Jill’s PPF
1 1 2 3 4 5 Shirts (per hour)
1) In the figure above, point B is:
2 points. Answer depends on version.
A) Unattainable for Joe and inefficient for Jill.
B) Unattainable for Jill and inefficient for Joe.
C) Unattainable for both Joe and Jill.
D) Inefficient for both Joe and Jill.
2) In the figure above, Joe is operating at point A. Joe’s opportunity cost of producing a shirt is
A) 5/3 pair of pants. 2 points
B) 3/5 pair of pants.
C) 5 pairs of pants.
D) 2 pairs of pants.
3) If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect?
A) Joe will specialize in shirts, and Jill will specialize in pants.
B) Joe will specialize in pants, and Jill will specialize in shirts. 2 points
C) Both Joe and Jill will spend half their time making shirts and half their time making pants.
D) Both answers B and C are true.
4) If Joe and Jill marry (or merge) what will their PPF look like? Draw it here: The graph should connect the following three points:
8 pants, 0 shirts
5 pants, 5 shirts
0 pants, 8 shirts
Points: 3: 1 for correct intercepts, 2 for correct kink. ...
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- Fall '07
- Economics, English given names, Cantopop, Q1. George, a. George/Carolyn 02 00has 02 00an 02 00absolute 02 00advantage 02 00in 02 00producing 02 00cookies. 02 00, d. George/Carolyn 02 00has 02 00a 02 00comparative 02 00advantage 02 00in 02 00producing 02 00milkshakes