Assumption University, Spring 2022, 1, ECO-110, PRINCIPLES OF MICROECONOMICS, D. Kantarelis Homework 1 (Due: Fr 1/21/22) (1) Describe the Economic Problem and, explaining why, offer your favorite solution. (2) Can you think of two causes of scarcity? (3) A computer systems engineer could paint her house, but it makes more sense for her to hire a painter to do it. Explain why. (4) Countries A and B produce two goods (Y and X) subject to the following Production Possibilities Curves (PPCs): A: Y = 240 - 1.5X, B: Y = 360 - 3X (i) Graph the PPCs and determine which country has a comparative advantage in Y and which one in X. (ii) Initially, A and B produce at the midpoints of their respective PPCs. How much total output Q (Q-X+Y) the two countries produce? (iii) Allow the countries to completely specialize according to their comparative advantages. After complete specialization, how much Q the two countries produce? (iv) Design a mutually beneficial trade and show, after trade, how much Q the two countries produce? (5) The Production Possibilities Curves (PPC) for countries A and B are as follows: A: Y - 290 - 2X, B: Y - 300 - X (i) Graph the PPCs and determine which country has a comparative advantage in Y and which one in X (ii) Initially, A and B produce at the midpoints of their respective PPCs. How much total output Q (Q=X+Y) the two countries produce? (iii) Allow the countries to completely specialize according to their comparative advantages. After complete specialization, how much Q the two countries produce? (iv) Can the countries trade with each other after complete specialization? (v) Design a trade between the two countries, based on incomplete specialization, that may benefit them relative to their initial positions. Show graphically and numerically