Principles of Macroeconomics
Principles of Macroeconomics ECON 1010
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This 5 page Class Notes was uploaded by Hallie Kuphal on Wednesday October 28, 2015. The Class Notes belongs to ECON 1010 at University of Wyoming taught by Benjamin Cook in Fall. Since its upload, it has received 10 views. For similar materials see /class/230361/econ-1010-university-of-wyoming in Economcs at University of Wyoming.
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Date Created: 10/28/15
ECON 1010 Principles of Macroeconomics Ben Cook 4 Step Method for Solving Comparative Advantage Problem Setup the Box Calculate Opportunity Costs Circle the Lowest Opportunity Cost in Each Row Determine Who column hasa Comparative Advantage circled for a Particular Good oriService row PPN a Tom39s Production and Consumption b Hank s Production and Consumption Quantity of coconuts Quantity of coconuts 30 Tom39s consumption without trade Hank39s production with trade Tom s consumption With trade Hank s consumption 39th trade 10 39 prggutd39gn 10 Hank sconsumptian 9 3 I W m e 8 39 39 39 without trade Tom39s Hank39s PPF PPF O 2830 0 6 10 Quantity of fish Quantity of fish PersonCounty 1 PersonCountry 2 Opportunity Cost Opportunity Cost Hank Opportunity Cost xAxis V Intercept V Intercept X Intercept ntercept Fish 2 Cu r nuts Pmdu UnitsVAxis Product UnitsVrAxis Product X Intercept X lntercept V A V Intercept V Intercept Coconut Product UnitsXAxis Product UnitsXAxis Product ECON 1010 Principles of Macroeconomics Ben Cook Some Chapter 2 Problems for PPF and Comparative Advantage 1 Hwan i 1 M iii lrdlhmii39nvh nth tlnnti moi nl irnth lrlime 39 p lat r a a production there are fewer resources available for catching sh Maximum annual Gummy oi puhlnes Quantity of sh nulpm options lpoundsl pounusl A 1000 o a son 300 r son 500 11 10a one E 200 550 F u 575 on the Vertical axis illustrating these options showing points Aer b Can Atlantis produce 500 pounds of sh and 300 pounds ofpotatoes Explain Where would this point lie relative to the production possibility frontier r to 300 pounds d to 400 pounds c this imply about the slope of the production possibility frontier ECON 1010 Principles of Macroeconomics Ben Cook A Problem Similar to an Apliacom Problem Wood Furniture Inc produces wooden TABLES and wooden chairs using two types of inputs wood and workers Each good is produced with the following restrictions 0 Each chair requires 10 units of wood and 1 worker 0 Each table requires 20 units of wood and 1 worker a Setup a graph with Chairs on the Xaxis and Tables on the Yaxis b On the same graph draw two different linear PPF curves for the following cases i They only have 800 workers but unlimited wood ii They have only 10000 units of wood but unlimited workers c Now shade in the area on the graph representing the feasible set of production points if they have limited amounts of both goods ie they have only 800 workers and only 10000 units of wood ECON 1010 Principles of Macroeconomics Ben Cook A Simple Comparative Advantage Problem Quantity of Pizza Quantity of Cola 0 Lozano 15 25 L0 7 0 0 12 The economies of Lozano and Bilma can produce the following two goods in the same time period with a fixed amount of resources Assume straight line linear production possibility frontiers a Draw the PPF for each economy side by side putting cola on the xaxis and pizza on the yaxis b Which country has an absolute advantage in one or both goods c Calculate the opportunity costs for pizza in each economy and indicate who has the comparative advantage in each good ECON me P dples of Macroeconomics Ben Cook 39 onlytv rl 39 r m riu There are Wu tribes in Rama the Tivoli and the Frivoli By themselves the Tivoli each month can produce either 30 pounds otspaghetti and no meatballs or so pounds of meatballs and no spaghetti or any combination in between The Fril39oli by themselves 39 r vi n A F meatballs and no spaghetti or any combination in between a Assume that all production possibility frontie are straight lines Draw one diae gram showing the monthly production possib 39ty fruutier fur the Tivoli and any how you calculated thern IL uiul Lriu nu 39 39 39 e production In AD 39 39 39 39 39 the quantity uf meatballs they can produee each month t Draw the new monthly production possibility fmntier for the rriyoli d 39 39 which hall production in spaghetti pruduction