Hi k9queen!!
14) Assume we have two producers, May and CLiff. In one hour May can
produce 8 bushels of wheat and in one hour May can produce 8 bushels
of corn. In one hour Cliff can produce 20 bushels of wheat and in one
hour Cliff can produce 10 bushels of corn. Assume initially that
there is no trade between the two. Assume that May is producing both
wheat and corn. If a bushel of wheat is selling for $10 then how much
must a bushel of corn be selling for?
b)$10 .
In effect, the opportunity cost of both products is the same for May,
then the price of both products must be the same.
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15)Assume we have two producers, May and Cliff. In one hour May can
produce 8 bushels of wheat and in one hour May can produce 8 bushels
of corn. In one hour Cliff can produce 20 bushels of wheat and in one
hour Cliff can produce 10 bushels of corn. Assume initially that
there is not trade between the two. Assume that Cliff is producing
both wheat and corn. If a bushel of wheat is selling for $8 then how
much must a bushel of corn be selling for?
For producing 10 bushels of corn Cliff gives up 20 bushels of wheat,
then the opportunity cost of 1 bushel of corn is 2 bushels of wheat
(for Cliff only), then the price of 1 bushel of corn must be 2 x
(Price of 1 bushel of wheat); the correct answer is:
a)$16.
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16)Assume we have two producers, May and Cliff. In one hour May can
produce 8 bushels of wheat and in one hour may can produce 8 bushels
of corn. In one hour Cliff can produce 20 bushels of wheat and in one
hour Cliff can produce 10 bushels of corn. Assume initially that
there is no trade between the two. Assume that May and Cliff are both
producing both wheat and corn. May is selling a bushel of wheat for
$10 and Cliff is selling a bushel of corn for $14. People engaged in
arbitrage can make money by:
b)buying wheat from Cliff and selling it to May's customers.
Cliff is selling the unit of corn for $14, then Cliff is selling the
unit of wheat for $7 (this is because the different opportunity
costs). If May is selling the unit of wheat for $10, then people
engaged in arbitrage can make money by buying wheat to Cliff for $7
each bushel, and then selling it to the May's costumers for $10.
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17)Assume you have 2 producers. Both types can produce doors or
cabinets. Producers of Type A can produce 3 doors in an hour or can
produce 15 cabinets in an hour. Producers of Type B can produce 1
door in an hour or can produce 3 cabinets. Assume each producer is
producing the good that it has a comparative advantage in. It is not
possible for there to be a mutually beneficial trade between the two
types of producers if:
a)Producer of Type A tries to trade away doors for cabinets.
Producer of Type A can produce in one hour 15 cabinets or 3 doors,
then its opportunity costs are:
Cost of 1 cabinet = 1/5 door.
Cost of 1 door = 5 cabinets.
Producer of Type B can produce in one hour 3 cabinets or 1 doors, then
its opportunity costs are:
Cost of 1 cabinet = 1/3 door.
Cost of 1 door = 3 cabinets.
Producers of Type A will produce cabinets because they have a
comparative advantage in the production of this product, and Producers
of Type B will produce Doors.
If a Producer of Type A tries to trade away 1 door for cabinets, it
will receive 3 cabinets in exchange for it from producer of Type B,
then the producer of Type A will "lost two cabinets", because the cost
to produce the extra door for exchange is 5 cabinets.
In the other hand, the Producer of Type B that accept this exchange
must produce 3 extra cabinets to receive one door from the producer of
Type A obtaining no gain from the exchange (the cost to produce 3
cabinets is 1 door).
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I hope this helps you.
Best regards.
livioflores-ga |
