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ECON 102 Homework Assignment

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Question;1. (25 points) Assume Nebraska and Virginia each have 100 acres of farmland. The following table gives hypothetical figures for yield per acre in the two states: Nebraska Virginia Wheat 16 4 Cotton 9 3A) (8 points)Who has the absolute advantage in the production of wheat?Who has the absolute advantage in the production of cotton?Who has the comparative advantage in the production of wheat?Who has the comparative advantage in the production of cotton?B) (8 points) In this exercise, you will find actual points on the combined PPC of the two states. For each of the following values of one good, calculate the maximum amount of the other good that the two countries could produce working together. WheatCotton6402105701700C) (9 points)a) On the back of this page, draw the graph for the PPF of the two states combined. On the graph, put the quantity of wheat on the vertical axis, and the quantity of cotton on the horizontal axis. Be sure to label your graph carefully to receive full credit!b) What is the marginal rate of transformation when the two states are producing a total of 200 units of cotton? 2. (17 points) Suppose the demand for guitars in State College is given by Qd = 5260 ? 12P where Qd is the quantity demanded, and P is the price of guitars. Also, suppose the supply of guitars is given by Qs = 9P ? 1460, where Qs is the quantity supplied of guitars.(6 points) Calculate the equilibrium price of guitars and the equilibrium quantity of guitars in State College. Show your work.(6 points) Suppose the actual price of guitars is $340. Determine if there is a shortage, a surplus, or if the market is in equilibrium at a price of $340. If there is a shortage or surplus, calculate how much the shortage or surplus is. (5 points) Given your answer to b), is the price of guitars likely to rise, fall, or stay the same?3. (8 points) Suppose the government increases the minimum wage. Fast food restaurants use minimum wage workers to produce cheeseburgers. On the back of this page, using a graph, illustrate how the increase in labor costs due to the increase in the minimum wage will affect the market for cheeseburgers. You may assume that there are no other significant changes in the cheeseburger market other than the increase in the minimum wage. Be sure to label your graph carefully and accurately, and clearly show what happens to the equilibrium price and quantity of cheeseburgers.

 

Paper#56461 | Written in 18-Jul-2015

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