Tute 2 - Tutorial 2 Week 3 Questions.pdf

Table 1 shows combinations of the goods that each

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Suppose that France and Germany both produce schnitzel and wine. Table 1 shows combinations of the goods that each country can produce in a day. Table 1 (i) Who has a comparative advantage in producing wine? Who has a comparative advantage in producing schnitzel? (ii) Suppose that France is currently producing one bottle of wine and 6 kg of schnitzel and Germany is currently producing three bottles of wine and 6 kg of schnitzel. Demonstrate that France and Germany can both be better off if they specialise in producing only one good and then engage in trade. Question 3 What is a free market ? In what ways does a free market economy differ from a centrally planned economy? From Chapter 3: Question 4 State whether each of the following events will result in a movement along the demand curve for McDonald’s Big Mac burgers or whether it will cause the curve to shift. If the demand curve shifts, indicate whether it will shift to the left or to the right and draw a graph to illustrate the shift. (i) The price of Hungry Jack’s Whopper burgers declines. (ii) McDonald’s distributes vouchers for $1.00 off on a purchase of a Big Mac. (iii) A shortage of potatoes causes the price of fries to increase. (iv) KFC raises the price of a bucket of fried chicken. (v) The Australian economy enters a period of rapid growth in incomes. FRANCE GERMANY WINE (BOTTLES) SCHNITZEL (kg) WINE (BOTTLES) SCHNITZEL (kg) 0 8 0 15 1 6 1 12 2 4 2 9 3 2 3 6 4 0 4 3 5 0
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3 Question 5 Briefly describe whether each of the following statements describes a change in supply or a change in the quantity supplied. (i) To take advantage of higher prices for umbrellas in winter, Shelter Umbrellas Company decides to increase output. (ii) The success of the Apple iPad-mini leads more firms to begin producing mini tablets. (iii) In the six months following the devastating earthquake and tsunami in Japan in 2011, motor vehicle production in Japan fell by 20%. [END]
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