Exam (elaborations)

University of California, DavisFOR 50ECN_1A_Homework

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University of California, DavisFOR 50ECN_1A_Homewo

Institution
University Of California, Davis

Question 1 a. To produce 1 pound of grass fed beef NautralBerg gives up 1.50 pounds of organic coffee b. Based on the table we can see that NaturalBerg has absolute advantage in organic coffee but c omparative advantage in organic coffee c. Based on comparative advantage OrganicVille should special...

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university of california
davisfor 50ecn1ahomework

Institution
University Of California, Davis
Course
University of California, DavisFOR 50ECN_1A_Homewo

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Homework #1

Question 1
a. To produce 1 pound of grass fed beef NautralBerg gives up 1.50 pounds of organic coffee
b. Based on the table we can see that NaturalBerg has absolute advantage in organic coffee but comparative advantage in
organic coffee
c. Based on comparative advantage OrganicVille should specialize in producing grass fed beef
d. If the NaturalBerg and OrganicVille specialize and then trade 50 pounds of organic coffee for 50 pounds of grass fed beef
with each other both countries can consume outside their individual PPFs
e. If OrganicVille splits its resources evenly between organic coffee and grass fed beef then it can consume without trade
300 pounds of organic coffee and 225 pounds of grass fed beef

Question 2
a. To produce 1 gadget Denise gives up 6/5 of a widget
b. From the table we can say that Denise has absolute advantage in gadgets and Evelyn in widgets
c. From the table we can say that Evelyn has comparative advantage in widgets and Denise in gadgets
d. For Evelyn, the opportunity cost of producing 4 gadgets is 15 widgets
e. If Denise and Evelyn specialize and trade with each other based on comparative advantage then Denise will buy widgets
and sell gadgets

Question 3
a. The opportunity cost of producing 1 entree for SupperLand is 0.5 side dishes
b. To produces 1 side dish, DinnerVille must give up 1 entree
c. Based on absolute advantage we can say that DinnerVille has absolute advantage in side dishes and SupperLand in
entrees
d. Based on comparative advantage we can say that DinnerVille has comparative advantage in side dishes and SupperLand
in entrees
e. Suppose DinnerVille and SupperLand specialize based on comparative advantage and trade with each other. For the
trading to be beneficial to both sides, the “price” of a side dish needs to be between 1 entree and 2 entrees

Question 4
a. If this economy goes from producing 0 Gadgets to
producing 5 Gadgets, the opportunity cost is 3 widgets
b. A combination such as 6 Widgets and 20 Gadgets is not
possible
c. A sudden increase in the availability of components that
help with Widgets but not Gadgets would mean this
economy could not produce more than 20 Gadgets, but
could produce more than 12 Widgets.
d. If this economy starts on its PPF producing 12 Widgets,
as it produces fewer and fewer Widgets, the opportunity
cost of producing Gadgets stays the same
e. The tradeoff of Gadgets and Widgets is to produce 1
Widget
This study source was downloaded by 100000841689952 from CourseHero.com on 06-28-2022 02:18:26you
GMThave
-05:00to give up 1.67 Gadgets

https://www.coursehero.com/file/93029552/ECN-1A-Homeworkpdf/

, Question 5

a. If we start by producing 0 BLT Sandwiches and then begin
to produce more and more BLT Sandwiches, we have to
give up increasing amounts of Club Sandwiches
production.
b. Going from producing 10 Club Sandwiches to producing
to producing 15 Club Sandwiches, the opportunity cost is
4 BLT sandwiches
c. Producing 5 BLT Sandwiches and 15 Club Sandwiches is
possible and efficient
d. If the economy is currently producing 9 BLT Sandwiches
and 10 Club Sandwiches, a general increase in technology
means the economy can produce more of both BLT
Sandwiches and Club Sandwiches.
e. If this economy were producing 4 BLT Sandwiches and 5
Club Sandwiches, then it could produce more BLT or Club
Sandwiches by using idle resources.

Question 6
a. The production possibilities frontier does not illustrate the best production point for an economy to produce.
b. All points inside the production possibility frontier are possible but inefficient
c. Increasing opportunity costs for a production possibility frontier can occur because resources are specialized for producing
certain types of goods and services.
d. Producing more of a good or service requires giving up production of another good or service.
e. On a production possibility frontier producing the maximum amount of one product implies producing none of the other
products as well

Homework #2

Question 1

a. In the market for Thingamabobs, the equilibrium price is $60
b. In the market for Thingamabobs, if the price is $40 then there is a
shortage of 60 units
c. In the market for Thingamabobs, if there were currently 50 units
being produced then there would be a surplus of 30 units
d. As the price of Thingamabobs decreases, the quantity supplied
decreases
e. The largest surplus for Thingamabobs occurs when the price is the
price is $80

This study source was downloaded by 100000841689952 from CourseHero.com on 06-28-2022 02:18:26 GMT -05:00

https://www.coursehero.com/file/93029552/ECN-1A-Homeworkpdf/

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