Oferta/Demanda Economía (Ingles)

NAME: Pablo

Assigment 3.

Due October 14th, 2012

True/False (7 points)
Indicate whether the statement is true or false.

False 1. Assume a farmer has the ability to produce corn and/or beans. Whenever the farmer spends 1 hour less producing corn and 1 hour more producing beans, he reduces his output of corn by 2 bushels and raises his output of beans by 3 bushels. In view of theseassumptions, the farmer’s production possibilities frontier is bowed out.

True 2. For a country producing two goods, the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

True 3. If one producer has the absolute advantage in the production of all goods, then that same producer will have the comparative advantage in the production of all goods aswell.

True 4. Ellie and Brendan both produce apple pies and vanilla ice cream. If Ellie’s opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan’s opportunity cost of one apple pie is 1/4 gallon of ice cream, Ellie has a comparative advantage in the production of ice cream.

True 5. Trade allows a person to obtain goods at prices that are less than that person's opportunitycost because each person specializes in the activity for which he or she has the lower opportunity cost.

False 6. For both parties to gain from trade, the price at which they trade must lie exactly in the middle of the two opportunity costs.

False 7. Ellie and Brendan both produce apple pies and vanilla ice cream. If Ellie’s opportunity cost of one apple pie is 1/2 gallon of ice cream andBrendan’s opportunity cost of one apple pie is 1/4 gallon of ice cream, a mutually advantageous trade can be struck at a price of one apple pie for 1/3 gallon of ice cream.

Multiple Choice (12 points)
Identify the choice that best completes the statement or answers the question.

Table 3-8

Assume that Huang and Min can switch between producing parasols and producing porcelain plates at aconstant rate.

|Labor Hours Neededto Make 1|Quantity Producedin 36 Hours|
|Parasol|Plate|Parasol|Plate|
Huang|2|6|18|6|
Min|2|4|18|9|


B. 8. Refer to Table 3-8. Which of the following points would be on Min's production possibilities frontier, based on a 36-hour production period?
a.|(3 parasols, 8 plates)|
b.|(8 parasols, 5 plates)|
c.|(11 parasols, 4 plates)|
d.|More than one of theabove would be on Min’s production possibilities frontier.|


Figure 3-6

Maxine’s Production Possibilities Frontier|Daisy’s Production Possibilities Frontier|



C. 9. Refer to Figure 3-6. Suppose Daisy decides to increase her production of pies by 6. What is the opportunity cost of this decision?
a.|8/3 tarts|
b.|4.5 tarts|
c.|8 tarts|
d.|10 tarts|


C. 10. If he devotes all ofhis available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that
a.|if he devotes all of his available resources to watermelon production, then he can produce 80 watermelons.|
b.|he cannot have a comparative advantage over other farmers in producing cantaloupes.|
c.|his opportunitycost of one watermelon is 2/3 of a cantaloupe.|
d.|his production possibilities frontier is bowed-out.|


Table 3-5

Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. Suppose that the maximum number of hours is 40 and that the technology is the following:



|Labor Hours Neededto Make 1 Unit of|Number of UnitsProduced in 40 Hours||Cheese|Bread|Cheese|Bread|
England|1|4|40|10|
Spain|4|8|10|5|


A. 11. Refer to Table 3-5. If England and Spain each spends all its time producing the good in which it has a comparative advantage and the countries agree to trade 2 units of bread for 6 units of cheese, then England will consume
a.|34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and 3 units of...