Homework Answers

Suppose that in a year an American worker can produce 80 shirts or 30 computers and a Chinese worker can produce 120 shirts or 20 computers. a. For each country, graph the production possibilities frontier. Suppose that without trade the workers in each country spend half their time producing each good. Identify this point in your graphs. b. If these countries were open to trade, which country would export shirts? Give a specific numerical example and show it on your graphs. Which country would benefit from trade? Explain. c. Explain at what price of computers (in terms of shirts) the two countries might trade. d. Suppose that China catches up with American productivity so that a Chinese worker can produce 120 shirts or 30 computers. What pattern of trade would you predict now? How does this advance in Chinese productivity affect the economic wellbeing of the two countries citizens?

American and Japanese workers can each produce 5 cars a year. An American worker can produce 8 tons of grain a year, whereas a Japanese worker can produce 4 tons of grain a year. To keep things simple, assume that each country has 50 million workers.

a. For this situation, construct a table b. Graph the production possibilities frontiers for the American and Japanese economies. c. For the United States, what is the opportunity cost of a car? Of grain? For Japan, what is the opportunity cost of a car? Of grain? Put this information in a table. d. Which country has an absolute advantage in producing cars? In producing grain? e. Which country has a comparative advantage in producing cars? In producing grain? f. Without trade, half of each countrys workers produce cars and half produce grain. What quantities of cars and grain does each country produce? g. Starting from a position without trade, give an example in which trade makes each country better off.

Qd = 960 – 30P ; Qs = 60 + 60P *

Maria can read 15 pages of economics in an hour. She can also read 40 pages of sociology in an hour. She spends 8 hours per day studying. a. Draw Marias production possibilities frontier for reading economics and sociology. b. What is Marias opportunity cost of reading 80 pages of sociology? 

4. Suppose that in a year an American worker can produce 80 shirts or 30 computers and a Chinese worker can produce 120 shirts or 20 computers.

a. For each country, graph the production possibilities frontier. Suppose that without trade the workers in each country spend half their time producing each good. Identify this point in your graphs.

b. If these countries were open to trade, which country would export shirts? Give a specific numerical example and show it on your graphs. Which country would benefit from trade? Explain.

c. Explain at what price of computers (in terms of shirts) the two countries might trade.

d. Suppose that China catches up with American productivity so that a Chinese worker can produce 120 shirts or 30 computers. What pattern of trade would you predict now? How does this advance in Chinese productivity affect the economic wellbeing of the two countries’ citizens?

1. Maria can read 15 pages of economics in an hour. She can also read 40 pages of sociology in an hour. She spends 8 hours per day studying.

a. Draw Maria’s production possibilities frontier for reading economics and sociology.

b. What is Maria’s opportunity cost of reading 80 pages of sociology?