Homework questions 2

Nancy and Bill are auto mechanics. Nancy takes 4 hours to replace a clutch and 2 hours to replace a set of brakes. Bill takes 6 hours to replace a clutch and 2 hours to replace a set of brakes. State whether anyone has an absolute advantage at either task and, for each task, identify who has a comparative advantage. The opportunity cost of a set of brakes for Nancy is __ of a clutch replacement. (1) The opportunity cost of a set of brakes for Bill is __ of a clutch replacement. (2) __has an absolute advantage in clutch replacement.(3) __has an absolute advantage in brake replacement.(4) __has a comparative advantage in clutch replacement.(5) __ has a comparative advantage in brake replacement.(6)

1) 0.50 2) 0.33 3)Nancy 4)Neither 5)Nancy 6)Bill

Ted can wax a car in 20 minutes or wash a car in 60 minutes. Tom can wax a car in 15 minutes or wash a car in 30 minutes. What is each man's opportunity cost of washing a car? Ted's opportunity cost of washing one car is __ wax jobs.(1) Tom's opportunity cost of washing one car is __ wax jobs. (2) Who has a comparative advantage in washing cars? (3)

1. 3 wax jobs 2. 2 wax jobs 3. Tom

Susan can pick 4 pounds of coffee in an hour or gather 2 pounds of nuts. Tom can pick 2 pounds of coffee in an hour or gather 4 pounds of nuts. Each works 6 hours per day. a. What is the maximum number of pounds of coffee the two can pick in a day? __ pounds. (1) b. What is the maximum number of pounds of nuts the two can gather in a day? __ pounds. (2) c. Suppose Susan and Tom were picking the maximum number of pounds of coffee when they decided that they would like to begin gathering 4 pounds of nuts per day. Who would gather the nuts? (3) How many pounds of coffee would they still be able to pick? __ pounds of coffee per day. (4) d. Now suppose Susan and Tom were gathering the maximum number of pounds of nuts when they decided that they would like to begin picking 8 pounds of coffee per day. Who would pick the coffee? (5) How many pounds of nuts would they still be able to gather? __ pounds of nuts per day. (6) e. Would it be possible for Susan and Tom in total to gather 26 pounds of nuts and pick 20 pounds of coffee each day? (7) If so, how much of each good should each person pick? (8) The combination of 30 pounds of coffee and 12 pounds of nuts per day is (9) The combination of 24 pounds of coffee and 24 pounds of nuts per day is (10)

1. 36 pounds 2. 36 pounds 3. tom 4. 34 pounds 5. Susan 6. 32 pounds 7. Yes 8. Coffee Nuts Tom 0 pounds 24 pounds Susan 20 pounds 2 pounds 9. attainable and efficient 10. attainable and efficient

Susan can pick 4 pounds of coffee in an hour or gather 2 pounds of nuts. Tom can pick 2 pounds of coffee in an hour or gather 4 pounds of nuts. Each works 6 hours per day. Assume that Tom and Susan specialize according to their comparative advantage to produce coffee and nuts. a. Suppose that Susan and Tom could buy or sell coffee and nuts in the world market at a price of $2 per pound for coffee and $2 per pound for nuts. If each person specialized completely in the good for which he or she had a comparative advantage, how much could they earn by selling all they produce (Tom's earnings plus Susan's earnings)? $ __ per day? (1) b. At the prices just described, what is the maximum amount of coffee Susan and Tom could buy in the world market with the income they earned? The maximum amount of nuts? Maximum amount of coffee that could be bought:__ pounds. (2) Maximum amount of nuts that could be bought: __ pounds. (3) Using the world market and the prices described above, would it be possible for Susan and Tom to consume 40 pounds of nuts and 8 pounds of coffee each day? (4)

1. 96 2. 48 pounds 3. 48 pounds 4. Yes

Consider a society consisting only of Helen, who allocates her time between sewing dresses and baking bread. Each hour she devotes to sewing dresses yields 4 dresses and each hour she devotes to baking bread yields 8 loaves of bread. a. If Helen works a total of 8 hours per day, graph her production possibilities curve. (can't copy the graph) b. Using the graph above, which of the points listed below are attainable and/or efficient? i. 28 dresses per day, 16 loaves per day: (1) ii. 16 dresses per day, 32 loaves per day: (2) iii. 18 dresses per day, 24 loaves per day: (3)

1. Unattainable 2. Attainable and efficient 3. Attainable and inefficient

Consider a society consisting only of Helen, who allocates her time between sewing dresses and baking bread. Each hour she devotes to sewing dresses yields 4 dresses and each hour she devotes to baking bread yields 8 loaves of bread. Suppose that a sewing machine is introduced that enables Helen to sew 8 dresses per hour rather than only 4. a. If Helen works a total of 8 hours per day, show how this development shifts her production possibilities curve on the graph below. (can't copy the graph) b. Using the graph above, indicate if the following points are attainable and/or efficient before and after the introduction of the sewing machine. i. 16 dresses per day, 48 loaves per day: ___ before the sewing machine and ___ after its introduction.(1) ii. 24 dresses per day, 16 loaves per day: ___ before the sewing machine and___ after its introduction(2) c. "An increase in productivity with respect to any one good increases our options for producing and consuming all other goods." Which of the following best explains the meaning of that statement? (3)

1. Unattainable, attainable and efficient 2. Attainable and efficient, attainable and inefficient 3. An increase in output per hour for any one good frees up resources that can be devoted to the production of other goods.

An individual has an absolute advantage in producing pizzas if that individual:

can produce more pizzas in a given amount of time than anyone else.

A graph that illustrates the maximum amount of one good that can be produced for every possible level of production of the other good is called a(n):

production possibilities curve.