Question
(1) Maria can read 20page of economics in an hour. She can also read 50page of sociology in an hour. She spends 5 hours per
(1) Maria can read 20page of economics in an hour. She can also read 50page of sociology in an hour. She spends 5 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 100pages of sociology?
(2) American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers.
(A) For this situation, construct a table analogous to the table in Figure 1. (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 analogous to Table 1. (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 country's workers pro- duce 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.
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