Chapter 2, Scarcity, Choice, and Economic Systems Video Solutions, Microeconomics: Principles and Applications

Problem 1

Redraw Figure $1,$ but this time identify a different set of points along the frontier. Starting at point $F(5,000$ tanks, zero production of wheat), have each point you select show equal increments in the quantity of wheat produced. For example, a new point $H$ should correspond to 200,000 bushels of wheat, point $J$ to 400,000 bushels, point $K$ to 600,000 bushels, and so on. Now observe what happens to the opportunity cost of "200,000 more bushels of wheat" as you move leftward and upward along this PPF. Does the law of increasing opportunity cost apply to the production of wheat? Explain briefly.

Brandon Miskanic

Numerade Educator

00:51

Problem 2

How would a technological innovation in lifesaving say, the discovery of a cure for cancer-affect the PPF in Figure $7 ?$

Brandon Miskanic

Numerade Educator

00:56

Problem 3

How would a technological innovation in the production of other goods-say, the invention of a new kind of robot that speeds up assembly-line manufacturing affect the PPF in Figure $7 ?$

Brandon Miskanic

Numerade Educator

00:55

Problem 4

Suppose the Internet enables more production of other goods and helps to save lives (for simplicity, assume proportional increases). Show how the PPF in Figure 7 would be affected.

Brandon Miskanic

Numerade Educator

03:01

Problem 5

Suppose that one day, Gilligan (the castaway) eats a magical island plant that turns him into an expert at everything. In particular, it now takes him just half an hour to pick a cup of berries, and 15 minutes to catch a fish.
a. Redo Table 2 in the chapter.
b. Who- Gilligan or Maryanne-has a comparative advantage in picking berries? In fishing?
c. Suppose that Gilligan reallocates his time to produce two more units of his comparative advantage good and that Maryanne does the same. Construct a new version of Table 3 in the chapter, showing how production changes for each castaway and for the island as a whole.

Natalie Britton

Numerade Educator

06:36

Problem 6

Suppose that two different castaways, Mr. and Mrs. Howell, end up on a different island. Mr. Howell can pick 1 pineapple per hour, or 1 coconut. Mrs. Howell can pick 2 pineapples per hour, but it takes her 2 hours to pick a coconut.
a. Construct a table like Table 2 showing Mr. and Mrs. Howell's labor requirements.
b. Who-Mr. or Mrs. Howell-has a comparative advantage in picking pineapples? In picking coconuts? Which of the two should specialize in which tasks?
c. [Harder] Assume that Mr. and Mrs. Howell had originally washed ashore on different parts of the island, and that they originally each spent
12 hours per day working, spending 6 hours picking pineapples and 6 hours picking coconuts. How will their total production change if they find each other and begin to specialize?

Natalie Britton

Numerade Educator

02:48

Problem 7

You and a friend have decided to work jointly on a course project. Frankly, your friend is a less-thanideal partner. His skills as a researcher are such that he can review and outline only two articles a day. Moreover, his hunt-and-peck style limits him to only
10 pages of typing a day. On the other hand, in a day you can produce six outlines or type 20 pages.
a. Who has an absolute advantage in outlining, you or your friend? What about typing?
b. Who has a comparative advantage in outlining? In typing?
c. According to the principle of comparative advantage, who should specialize in which task?

Brandon Miskanic

Numerade Educator

00:51

Problem 8

Suppose that an economy's PPF is a straight line, rather than a bowed out, concave curve. What would this say about the nature of opportunity cost as production is shifted from one good to the other?

Brandon Miskanic

Numerade Educator

06:26

Problem 9

Go back to Table 5 in the chapter, which is based on the hours requirements in Table $4 .$ Suppose that when trade opens up between the U.S. and China, the U.S. increases its production of soybeans by 100 bushels (instead of 10 as in the table). China increases its production of T-shirts by 400 (instead of 40 ). Assume that when the two countries trade with each other, each bushel of soybeans is exchanged for 3 T-shirts. Finally, suppose that the U.S. trades (exports) 90 bushels of soybeans to China.
a. How many T-shirts from China will the U.S. receive in exchange for its soybean exports to China?
b. After trading with China, how many more bushels of soybeans will be available for Americans to consume (compared to the situation before trade)? How many more T-shirts?
c. After trading with the U.S., how many more bushels of soybeans will be available for the Chinese to consume? How many more T-shirts?
d. Based on this example, consider the following statement: "When two countries trade with each other, one country's gain will always be the other country's loss." Is this statement true or false? Explain briefly.

Yi Chun Lin

Washington University in St Louis

01:28

Problem 10

Evaluate the following statement: "If the dollar values in Table 6 are accurate, it follows that providing meningococcal vaccines to all adolescents would be cheaper than installing seat belts on all school buses." True or false? Explain.

Carson Merrill

Numerade Educator