Number 1
|
|
Bananas
|
Pineapples
|
Bananas
|
Pineapples
|
|
180
|
0
|
120
|
0
|
|
135
|
30
|
90
|
40
|
|
90
|
60
|
60
|
80
|
|
45
|
90
|
30
|
120
|
|
0
|
120
|
0
|
160
|
Dianna and Jim both produce bananas and pineapples on the Macro Islands. The table above shows some of the combinations of the two products that can be produced using the same resources.
Use the table above to answer the following questions:
1. What is Dianna's opportunity cost for producing 1 banana and 1 pineapple?
2. What is Jim's opportunity cost for producing 1 banana and 1 pineapple?
3. Who has the comparative advantage in the production of each good?
Number 2
The production possibilities frontiers above show the production possibilities for two goods produced in the Macro and Micro Islands using the same resources. From these curves, we can determine that the Micro Islands have an comparative advantage in producing suntan lotion and sun glasses. the Micro Islands have an absolute advantage in producing sun glasses and suntan lotion. the Macro Islands have a comparative advantage in producing suntan lotion. the Macro Islands have an comparative advantage in producing sun glasses. The Macro Islands have a comparative advantage in producing suntan lotion and the Micro Islands have a comparative advantage in producing sun glasses.
Number 3
Assume that two nations conclude a trade agreement and agree to specialize in the good in which they have the comparative advantage. Using the production possibilities curves above, it can be determined that the total production of good A will be 50 units. 100 units. 200 units. 250 units. 300 units.
Number 4
Two nations are negotiating a trade agreement for two goods. Both nations have the same amount of resources available to produce the two goods. Using the production possibilities curves above, you can determine that the opportunity cost of one unit of good B is 4 units of good A for Nation X and 2 units of good A for Nation Y. 4 units of good A for Nation X and 1/2 unit of good A for Nation Y. 1/4 unit of good A for Nation X and 2 units of good A for Nation Y. 1/4 unit of good A for Nation X and 1/2 unit of good A for Nation Y. 200 units of good A for Nation X and 50 units of good A for Nation Y.
Number 5
Two nations are negotiating a trade agreement for two goods. Both nations have the same amount of resources available to produce the two goods. Using the production possibilities curves above, you can determine that the opportunity cost of one unit of good A is 4 units of good B for Nation X and 2 units of good B for Nation Y. 4 units of good B for Nation X and 1/2 unit of good B for Nation Y. 1/4 unit of good B for Nation X and 2 units of good B for Nation Y. 1/4 unit of good B for Nation X and 1/2 unit of good B for Nation Y. 50 units of good B for Nation X and 100 units of good B for Nation Y.
Number 6
Assume the Macro Islands can build 5 hotels or 15 stores and the Micro Islands can build 4 hotels or 20 stores in the same time period. This data tells an economist that:
the Macro Islands have an absolute advantage in building stores and the Micro Islands have an absolute advantage in building hotels. the Macro Islands have a comparative advantage in building stores and the Micro Islands have a comparative advantage in building hotels. the Macro Islands have a comparative advantage in building hotels and the Micro Islands have a comparative advantage in building stores. the Micro Islands have a comparative and absolute advantage in producing building hotels. the Macro Islands have a comparative and absolute advantage in producing building stores.