1)There are two countries, A and B, that can each produce two goods, jeans and s
ID: 1135826 • Letter: 1
Question
1)There are two countries, A and B, that can each produce two goods, jeans and sweaters. Each country has 6 million labor hours to allocate to the production of each good. The table below identifies how many units of each good can be produced in each country with 1 hour of labor.
If both countries decide to completely specialize and produce only that good for which they have a comparative advantage, then in total they can produce________ millions jeans and ________ millions sweaters.
2)
A worker in Country X can produce 3.2 toasters per day or 6.8 blankets per day. A worker in Country Y can produce 6.2 toasters per day or 20.5 blankets per day.
Suppose each country has 100 days of labor available. If each country devotes 30% of the days to toaster production and 70% of the days to blanket production then in total they can produce_____ toasters_____blankets.
If the two countries completely specialize and trade then in total they can produce_______ toasters and________ blankets
3) Kate can read 20 pages of astronomy in an hour. She can also read 50 pages of philosophy in an hour. She spends 5 hours per day studying. What is Kate’s opportunity cost of reading 150 pages of philosophy? Enter a whole number with no other characters or words.
Jeans Sweaters Country A 10 4 Country B 28 7Explanation / Answer
1. country A can produce 2.5 jeans if it sacrifices producing 1 sweater.
country B can produce 4 jeans if it sacrifices producing 1 sweater.
Hence country A has a comparative advantage in producing sweaters since its opportunity cost of producing a sweater is less that country B's opportunity cost of producing a sweater. (2.5<4)
Hence country A will produce sweaters and B will produce jeans.
If both countries decide to completely specialize and produce only that good for which they have a comparative advantage, then in total they can produce___168_____ millions jeans and ___24_____ millions sweaters.
2. 30*3.2+30*6.2=282 toasters,
70*6.8+70*20.5=1911 blankets.
Opportunity cost of making a blanket in country X = 0.471 toasters.
Opportunity cost of making a blanket in country Y = 0.3024 toasters.
Hence country Y will produce blankets and country X will produce toasters.
If the two countries completely specialize and trade then in total they can produce___320____ toasters and____2050____ blankets.
3. 60 pages of astronomy.
Reading 150 pages of philosophy will take her 3 hours which she could have spent on studying 60 pages of astronomy.
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