Assume that Robinson can sell Bread for $1 per loaf.Each loaf of Bread is worth $1.So, if he produces cloth, he gives up his opportunity cost.In other words, if he chooses to go from point A to point B (i.e., make 1 yard of cloth and give up 2 loaves of bread), there is a $2 opportunity cost.
1.Robinson can choose how much Bread and Cloth to produce.Think of the O.C. of Cloth column as representing what Robinson has to "pay" (in opportunity) if he chooses to make that last unit of cloth.How many yards of cloth would Robinson choose to produce if...(note: the .25 increments are only here to simplify the question)
a.he can only sell cloth for $1.25/yard?
Answer: 0 (because $1.25 is less than the $2 opportunity cost we get from moving to point B.If he moves from point A to B, he "pays" $2.)
b.he can sell cloth for $2.25/yard?
Answer: 1 (because $2.25 covers his $2 opportunity cost with 25 cents to spare, but he won't make the second yard, because the opportunity cost of that second yard is $3)
c.he can sell cloth for $3.25/yard?
d.he can sell cloth for $4.25/yard?
e.he can sell cloth for $5.25/yard?
f.he can sell cloth for $6.25/yard?
When Robinson built a loom in #3, the Supply curve shifted from S2 to S3.Which term best describes this particular movement?
a.Supply Increasedb.Supply Decreased
c.Decrease in Quantity Supplied c.Increase in Quantity Supplied
- What is the equilibrium price?
- What is the equilibrium quantity?
- What will happen in the market for peanut butter if a hurricane hits the peanut fields in the South?
a)Demand Increases, Equilibrium Price Increases and Equilibrium Quantity Increases
b)Demand Decreases, Equilibrium Price Decreases and Equilibrium Quantity Decreases
c)Supply Increases, Equilibrium Price Decreases and Equilibrium Quantity Increases
d)Supply Decreases, Equilibrium Price Increases and Equilibrium Quantity Decreases
- If the price of peanut butter rises, what happens in the market for jelly? (consumers see peanut butter and jelly as complements)
a)Demand Increases, Equilibrium Price Increases and Equilibrium Quantity Increases
b)Demand Decreases, Equilibrium Price Decreases and Equilibrium Quantity Decreases
c)Supply Increases, Equilibrium Price Decreases and Equilibrium Quantity Increases
d)Supply Decreases, Equilibrium Price Increases and Equilibrium Quantity Decreases
- If the quantity of peanut butter sold falls, what happens in the market for plastic jars used for peanut butter as a result?
a)Demand Increases, Equilibrium Price Increases and Equilibrium Quantity Increases
b)Demand Decreases, Equilibrium Price Decreases and Equilibrium Quantity Decreases
c)Supply Increases, Equilibrium Price Decreases and Equilibrium Quantity Increases
d)Supply Decreases, Equilibrium Price Increases and Equilibrium Quantity Decreases
Robinson Crusoe Supply Curves - Chapter 3+ Label it S1.+ Plot the points on the graph below, then connect the dots. This is Robinson's Supply for Cloth. Bread+ Cloth+ OC of Bundle+ (Loaves (Yards one Price+ + per per yard of Month)+ Month)+ cloth+ A+ 20+ 20 187 3+ C+ 15+ 2+ 4+ 11+ 3+ 5+ Assume that Robinson can sell Bread for $1 perloaf. Eachloaf of Breadis worth $1. So, if he produces 1 2 3 5 6 Cloth in Yards+ cloth, he gives up his opportunity cost. In other words, if he chooses to go from point A to point B (i.e., make 1 yard of cloth and give up 2 loaves of bread), there is a $2 opportunity cost.+ 1. Robinson can choose how much Bread and Cloth to produce. Think of the O.C. of Cloth column as representing what Robinson has to "pay" (in opportunity) if he chooses to make that last unit of cloth. Howmany yards of cloth would Robinson choose to produce if... (note: the .25 increments are only here to simplify the question)+ a. he can only sell cloth for $1.25/yard? + Answer: 0 (because $1.25 is less than the $2 opportunity cost we get from moving to point B. If he moves from point A to B, he "pays" $2.)+ b. he can sell cloth for $2.25/yard?+ Answer: 1 (because $2.25 covers his $2 opportunity cost with 25 cents to spare, but he won't make the second yard, because the opportunity cost of that second yard is $3)+ c. he can sell cloth for $3.25/yard?+ d. he can sell cloth for $4.25/yard?+ he can sell cloth for $5.25/yard?" f. he can sell cloth for $6.25/yard?+ + Fill in the following table...+ Price of Cloth+ Quantity of Cloth Produced by Robinson+ from the Cloth column above)+ $1.25+ 0+ $2.25+ 1+ $3.25+ $4.25+ $5.25+ $6.25+2. Now imagine that a hunicane hits the island and destroys some of the wheat crop, but does not affect his 3. ability to produce cloth. The following chart represents Robinson's NEW PPF for bread and cloth. Now imagine that a Robinson builds a loom and can nowproduce a little more Cloth with the Opportunity costs change. The PPF changes. + same land andlabor. The following chart represents Robinson's PPF for bread and cloth.+ Bread+ Bread+ Possibility+ Cloth (Loaves per Month)+ (Yards per Month)+ Opportunity Cost of 1 + Possibility+ Cloth+ Loaves per Month)+ (Yards per Month)+ Opportunity Cost of 1 4 Yard of Cloth Yard of Cloth+ A+ 15., A+ 150 0.7 14. B+ 140 2. 1+ 12+ C+ 12. 4.1 2+ 9.1 9+ 6.1 3+ 5+ 5.1 4+ 0.7 10. Assume that Robinson can still sell Bread for $1 per loaf.+ Assume that Robinson can still sell Bread for $1 per loaf.+ Fill in the following table...+ Fill in the following table...+ Price of Cloth+ Price of Cloth+ Quantity of Cloth Produced by Robinson+ $1.25+7 Quantity of Cloth Produced by Robinson+ $1.25+ $2.25+ $3.25+ $3.25+ $4.25+ tt $2.25+ $5.25+ Plot the points below. This is Robinson's NEW Supply for Cloth. Label it S3.+ Price+1 Plot the points below. This is Robinson's NEW Supply for Cloth. Label it $2.+ Price+ 1 6 8 9 10 Cloth+ What you are doing is "shifting" the supply curve in response to changes in resources or prices of 1 2 3 4 5 6 Cloth in Yards+ related goods. Increasing it by moving it to the right and decreasing it by moving it to the left. Things that change your PPF or things that change the prices of related goods will do this.+4. When Robinson built a loom in #3, the Supply curve shifted from $2 to $3. Which 7. What will happen in the market for peanut butter if a hurricane hits the peanut term best describes this particular movement?+ fields in the South?+ Supply Decreased+ a) Demand Increases, Equilibrium Price Increases and Equilibrium Quantity Supply Increased b. Increases+ b) Demand Decreases, Equilibrium Price Decreases and Equilibrium C . Decrease in Quantity Supplied C . Increase in Quantity Supplied+ Quantity Decreases+ c) Supply Increases, Equilibrium Price Decreases and Equilibrium Quantity Increases+ d) Supply Decreases, Equilibrium Price Increases and Equilibrium Quantity Problem 5 is based on the following demand and supply schedules for peanuts (all Decreases+ quantities are in millions of bushels per year).+ Price per bushel- Quantity demanded+ Quantity supplied+ 6+ t 8. If the price of peanut butter rises, what happens in the market for jelly? 1+ 40 2+ 3+ ttttt (consumers see peanut butter and jelly as complements) a) Demand Increases, Equilibrium Price Increases and Equilibrium Quantity Increases+ 8+ 2+ 4+ b) Demand Decreases, Equilibrium Price Decreases and Equilibrium 10+ Quantity Decreases+ 12+ c) Supply Increases, Equilibrium Price Decreases and Equilibrium Quantity Increases+ Draw the demand and supply curves for peanuts.+ d) Supply Decreases, Equilibrium Price Increases and Equilibrium Quantity Decreases+ 9. If the quantity of peanut butter sold falls, what happens in the market for plastic jars used for peanut butter as a result?+ a) Demand Increases, Equilibrium Price Increases and Equilibrium Quantity Increases+ b) Demand Decreases, Equilibrium Price Decreases and Equilibrium Quantity Decreases+ c) Supply Increases, Equilibrium Price Decreases and Equilibrium Quantity Increases+ d) Supply Decreases, Equilibrium Price Increases and Equilibrium Quantity Decreases+ 5. What is the equilibrium price?+ 6. What is the equilibrium quantity?+
