View the step-by-step solution to:

# EC 330, Winter 2014 Your name: _________________________ University of Oregon Student ID #: _________________________ Problem Set #1 Due in lecture...

I am having trouble on all of question 6. I would be great to get your help.

EC 330, Winter 2014 Your name: _________________________ University of Oregon Student ID #: _________________________ Page 1 of 6 Problem Set #1 Due in lecture January 27, 2014. No late problem sets accepted! NOTE: To ensure proper grading, write your answers in the area indicated. 1. Specialization and Trade Two settlements, Catville and Anville, produce both ore and wood. In one week, Catville can produce 28 tons of ore (and no wood) or 14 tons of wood (and no ore) or some linear combination of the two. Over the same period, Anville can produce 45 tons of ore (and no wood) or 15 tons of wood (and no ore) or some linear combination of the two. a. Which settlement has the absolute advantage in producing ore? Catville or Anville (circle one) Why? Which settlement has the absolute advantage in producing wood? Catville or Anville (circle one) Why? b. Fill in the table, giving the opportunity costs of Catville and Anville: opportunity cost of 1 ton of ore opportunity cost of 1 ton of wood Catville Anville Which settlement has the comparative advantage in producing ore? Catville or Anville (circle one) Which settlement has the comparative advantage in producing wood? Catville or Anville (circle one) c. Catville had been producing 12 tons of ore and 8 tons of wood per week by itself, while Anville had been producing 30 tons of ore and 5 tons of wood per week. They have now decided to specialize completely (that is, one town will produce nothing but ore, and the other town will produce nothing but wood) and then trade. Which settlement will produce only ore? Catville or Anville (circle one) Which settlement will produce only wood? Catville or Anville (circle one) How many tons of ore will be produced per week? __________ How many tons of wood will be produced per week? __________ Compared to what the two towns collectively produced before specializing, working together they now produce __________ more ton(s) of ore and __________ more ton(s) of wood per week. (Show your work.)
EC 330, Winter 2014 Problem Set 1 University of Oregon Page 2 of 6 2. Matter Transmitter and Trading City Consider a region with two standardized products (bread and shirts) that are transported by horse-drawn wagons. There is a single trading city. Consider the effects of a new matter transmitter, an indivisible input that is economical for trading firms in the city, but not for an individual household. A transmitter instantly transports goods from a production site (a farm or workshop) to the trading firm, and the marginal cost is zero. a. The labor used in transporting products from production sites to trading firms will [ increase ; decrease ; not change (circle one)] because… [Explain below.] b. The volume of trade in the region will [ increase ; decrease ; not change (circle one)] because… [Explain below.] c. The labor used in processing transactions (banking, accounting, insuring) will [ increase ; decrease ; not change (circle one)] because… [Explain below.] d. Review your answers to parts a) and c) above. The trading city will grow if ________ exceeds ________. [Write what would go in the blanks below; each phrase will be longer than the length of the blanks themselves suggest. No need for further explanation.] e. Suppose the transmitter technology changes, and it becomes economical for an individual household. The trading city will [ grow ; shrink ; disappear (circle one)] because… [Explain below.]
Show entire document
Sign up to view the entire interaction

You own a firewood business that involves chopping down trees, cutting the trees up into
firewood, and transporting then to market. You can either cut the trees up into firewood where
they are...

### Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

### -

Educational Resources
• ### -

Study Documents

Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

Browse Documents
• ### -

Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!