omparative Advantage ssuming constant opportunity costs, suppose Mickey can prod

Question

omparative Advantage ssuming constant opportunity costs, suppose Mickey can produce either 800 cheese and 0 rackers, or 0 cheese and 200 crackers; and Minnie can produce either 150 cheese and 0 rackers, or 0 cheese and 450 crackers. State who has a comparative advantage in cheese. Explain why. (5 points) b. Without trade Mickey produces 400 cheese and 100 crackers, and Minnie produces 100 cheese and 150 crackers. If the terms of trade are 1 cheese 1 cracker, what are the gains from specialization and trade for each good to each trader if Mickey trades 200 units of the good he has a comparative advantage in? (5 points) Supply and Demand a. Given Q 700- 2P and Q 2P 100, what is the market equilibrium price (P*) and quantity (Q*)? (5 points) b. Suppose the market changes to:Q 700- 2P and Q P 40. Calculate the new market equilibrium price (P**) and quantity (Q*). (5 points) Elasticit,y Use your answers in the supply and demand question above, to calculate the mid- point formula for the price elasticity of demand (two decimal places). Using your answer in part a, is the price elasticity of demand elastic, inelastic or unit elastic? (3 points) State how you were able to determine if the price elasticity of demand is elastic, inelastic or unit elastic. (3 points) a. (4 points) b. c.

Explanation / Answer

Supply and demand

a) Qd = 700 - 2P and Qs = 2P - 100

market equilbruim is at QD=QS

700 - 2P = 2P - 100

800 = 4P

P = 200

Q = 700 - 2*200 = 300

so market equilbruim price is 200and quantity is 300

b) Qd = 700 - 2P and Qs = 2P - 40

now Qd=Qs

700 - 2P = 2P - 40

740 = 4P

P = 185

Q = 330

for more asnwer - elasticity- please upload it againt- it against chegg policy.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.