Economics Homework

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  1. This is a satellite image of the East Asian peninsula. What does this tell us about autarky? ($1,000)
  1. Assume the price of cherries is $4 (per pound) and the price of strawberries is $3 (per pound). What is the relative price of cherries? What does this measure? ($1,000)
  1. Suppose there are 6,000 hours of labor available in Denmark and that 10 hours of labor are required to produce one unit of soda, while 5 hours are required to produce one unit of biscuits. Graph the PPF for this country. Place soda on the vertical axis and biscuits on the horizontal. Use this to answer questions.
  1. A) What is the maximum amount of soda and biscuits Denmark can produce? ($1,000)
  1. B) Draw a graph of the PPF using the information above. On your graph, place soda on the vertical axis and biscuits on the horizontal axis. Be sure to label the axes, the numerical & the PPF. Assume the PPF slope is linear. ($1,000)
  1. C) What is the value of the slope? Show workings to get full credit. ($1,000)
  1. D) What does this slope value represent? ($1,000)
  1. The economy has 400 units of capital (K) & 400 units of labor (L) and makes pencils & rulers. The production technology to make 1 unit of:
  • Pencils: requires 2 units of K or 1 unit of L
  • Rulers: requires 1 unit of K or 2 units of L
  1. A) What are the intercepts? Illustrate this on a graph (place pencils on the vertical axis; rulers on the horizontal axis) ($1,000)
  1. B) What is the output bundle if we divide K and L evenly between pencils & rulers? Illustrate this. ($1,000)
  1. C) What happens to total output if we use only L to make pencils and only K to make rulers? ($1,000)
  1. D) Illustrate your answer to part C with a graph. ($1,000)

 

  1. E) Consider the bow-out shape of the PPF, what happens to opportunity cost as we move towards either end intercept? ($1,000)
  1. The diagram below shows an autarky equilibrium.
  2. A) Which point(s) represent autarky equilibrium? Why? ($500)

 

  1. B) Do points B and D represent autarky equilibrium? Why/why not? ($500)
  1. C) Can the economy operate at point E? Why/why not? ($500)
  1. D) Would the economy operate at point A? Why/why not? ($500)
  1. A country produces 2 goods: knives & forks. This country is at a point “A” on its bowed out PPF where the slope of the PPF is equal to the slope of the CIC touching that same point.
  1. A) Illustrate this on a diagram. Place knives on the vertical axis, forks on the horizontal axis, and make sure you include all labels. ($1,000)
  1. B) If the country moved away from production point “A”, down along the PPF to another point called “B”, would the standard of living rise, fall or stay the same? Mark Point B on the graph in Part A. Provide 2 factors in your answer. ($1,000)
  1. Consider the following data on the factor endowments of two countries, A and B:

 

  Countries
  A B
Labor Force 16 10
Capital Stock 24 12

 

  1. A) Which country is relatively capital abundant? ($500)
  1. B) Which country is relatively labor abundant? ($500)
  1. C) Suppose that the production of bicycles is capital intensive relative to the production of computers. Which country will have comparative advantage in the production of bicycles? ($500)
  1. D) Explain your answer in part C. ($500)

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