Economics Problem Set
A) Suppose the United States can produce 20 tons of FOOD or 8 TRACTORS, and suppose Japan can produce 10 tons of FOOD or 3 TRACTORS.
B) What is the opportunity cost of producing tractors in the United States?
C) What is the opportunity cost of producing tractors in Japan?
D) Which country has comparative advantage in FOOD (show your calculations)
|
TRACTORS
|
FOOD
|
TRACTORS
|
FOOD
|
|
8
|
0
|
3
|
0
|
|
7
|
2.5
|
2
|
3.3
|
|
6
|
5
|
1
|
6.7
|
|
5
|
7.5
|
0
|
10
|
|
4
|
10
|
|
|
|
3
|
12.5
|
|
|
|
2
|
15
|
|
|
|
1
|
17.5
|
|
|
|
0
|
20
|
|
|
The production alternatives for the countries of USA and JAPAN is shown above:
E) Graph their respective production prossibilities (FOOD on the X-axis and TRACTORS on the Y-axis.
F) Which of these two countries has the comparative advantage and should specialize in the production of Tractors and why?
G) In a short paragraph, explain how specialization in one product will result in a gain or benefit to each of the countries if they trade.
H) Using the Table below to answer the questions that follow:
|
Days of Labor
|
Units of Output
|
Marginal Product of Labor (MPL)
|
Value of Marginal Product of Labor (VMPL)
|
|
0 days
|
0 units
|
|
|
|
1
|
7
|
|
|
|
2
|
13
|
|
|
|
3
|
19
|
|
|
|
4
|
25
|
|
|
|
5
|
28
|
|
|
|
6
|
29
|
|
|
|
7
|
29
|
|
|
a. Calculate the marginal product for each additional worker (MPL)
b. Each unit of output sells for $10.00. Calculate the value of the marginal product of each worker (VMPL)
c. Compute the demand schedule showing the number of workers hired for all wages from zero to $100.00.
d. Graph the firm's demand curve.
e. What happens to this demand curve if the price of output rises from $10.00 to $12.00 per unit?