Chapter 2: Q 2.3 (page 27)
Discuss why obtaining increasing increments of any particular good typically entails giving up more and more units of other goods.
Because the to produce any one good we use the resources of the other good.
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Country A and country B produce the same consumption goods and capital goods and currently have identical production possibilities curves. They also have the same resources at present, and they have access to the same technology.
a. At present, does either country have a comparative advantage in producing capital goods? Consumption goods?
b. Currently, country A has chosen to produce more consumption goods, compared with country B. Other things being equal, which country will experience the larger outward shift of its PPC during the next year?
After the concert discussed in Problems, 2-3 is over and you and your friend are traveling home, you discuss how each of you might otherwise have used the four hours devoted to attending the concert. The four hours could have been used to study, watch a sporting event on TV, or get some extra sleep. Your friend decides that if she had not spent four hours attending the concert, she would have chosen to study, and you reply that you otherwise would have watched the televised sporting event. Identify the relevant opportunity costs for you and your friend for allocating your four hours to attending the concert. Explain briefly.
You can wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. Your roommate can wash, fold, and iron a basket of laun-
dry in three hours and prepare a meal in one hour. Who has the absolute advantage in laundry, and who has an absolute advantage in meal preparation? Who has the comparative advantage in laundry, and who has a comparative advantage in meal preparation?
You and a friend decide to spend \(100 each on concert tickets. Each of you alternatively could have spent the \)100 to purchase a textbook, a meal at a highly-rated local restaurant, or several Internet movie downloads. As you are on the way to the concert, your friend tells you that if she had not bought the concert ticket, she would have opted for a restaurant meal, and you reply that you otherwise would have downloaded movies. Identify the relevant opportunity costs for you and your friend for the concert tickets that you purchased. Explain briefly.
Suppose that in Fig 2-24, the nation with other wise the same background conditions as in Problem 2-23 currently has sufficient resources to produce combinations located along only the innermost production possibilities curve. If the nation produces no additional smartphones this year, will the intermediate-shifted PPC resulting from minimal economic growth or the farthest shifted PPC caused by more significant economic growth be more likely to apply next year?
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