Demonstrate your understanding of the production possibility frontier model, marginal opportunity costs, and the differences in marginal opportunity costs. You will also demonstrate your understanding of the differences between absolute advantage and comparative advantage in different situations. Finally, you will demonstrate a clear understanding of the crucial concept of supply and demand and the impact on different groups caused by a change in demand.

1. In ancient days, a tribe of natives on the mythical continent of Atlantis could produce two commodities to eat. They could harvest fish from the sea, and they could grow a form of wild oats. Table 1.a. and Graph 1.a. both show the maximum annual output combinations of fish and wild oats that the natives of Atlantis could produce. Table 1.a Maximum Kilograms Bushels of annual of fish wild oats output options 1 7,000 0 2 6,000 300 3 5,000 500 4 4,000 625 5 3,000 710 6 2.000 775 7 1,000 825 8 0 850 Graph 1.a. Graph 1.a. - Atlantis Tribe's Production Possibility Frontier 8,000 7,000 # 0.7.090 6,000 5,000 500, 5,000 ilograms 4,000 of fish 625, 4,900 3,000 710. 1.090 2000 1,000 100 200 300 400 500 600 700 900 Bushels of wild oats2. The neighboring groups of New Yorkers and New Jersians produce only two products, bagels and calzones. By themselves, the New Yorkers, each day, can produce either 45 pounds of bagels and no calzones, or 30 pounds of calzones and no bagels, or any combination in between. The New Jersians, by themselves, each day, can produce 30 pounds of bagels and no calzones, or 28 pounds of calzones and no bagels, or any combination in between. Diagram 1.a. shows the daily production possibility frontier for the New Yorkers and Diagram 1.b. shows the daily production possibility frontier for the New Jersians. Table 2.a. New Yorkers Bagels Calzones 45 C 35 6 25 12 15 18 5 24 0 30 Table 2.b. New Jersians Bagels Calzones 30 0 22.5 7 15 14 7.5 21 0 28 Diagram 1.a. - New Yorkers' Production 350, 30 30 0 5. 24 25 15, 18 20 Calzones 15 25, 12 10 35, 6 45, 0 5 10 15 20 25 30 35 40 45 50 BagelsDiagram 1.b. - New Jersians Production 0. 28 30 25 7.5,21 15, 14 Calzones 22.5.7 30,0 5 10 15 20 25 30 BagelsLater, the New Yorkers discover a new technology for making calzones that dramatically increases the quantity of calzones they can produce each day. Diagram 1.c. shows both the old and the new daily production possibility frontier for the New Yorkers. The New Yorkers, each day, can now produce either 45 pounds of bagels and no calzones, or 50 pounds of calzones and no bagels, or any combination in between. Diagram 1.c. shows both the old and the new daily production possibility Frontiers for the New Yorkers and Diagram 1.b. shows the unchanged daily production possibility frontier for the New Jersians. Table 2.c. New Jersians Bagels Calzones 30 22.5 7 UNIT 3 BU224 ASSIGNMENT TEMPLATE Bagels Calzones 15 14 7.5 21 0 28 Diagram 1.c.- New Yorkers' NEW technology Production 55 50 5, 40 15, 30 Calzones 25, 20 35, 10 45, 0 5 10 15 20 25 30 35 40 45 50 Bagels Calzones old technology Calzones NEW technologyDiagram 1.b. - New Jersians Production 0, 28 30 25 7.5, 21 20 15, 14 Calzones 15 10 22.5,7 30,0 5 10 15 20 25 30 Bagels Table 2.d. New Yorkers Calzones New technology Bagels Calzones 45 0 35 6 10 25 12 20 15 18 30 24 40 30 50Table 3.a. Price of Ethiopian coffee beans Quantity of Ethiopian coffee beans (per pound) supplied (pounds) $4.00 6.000 $3.50 5.000 $3.00 4.000 $2.50 3.000 $2.00 2.000 Suppose that Ethiopian coffee beans are only being sold in Brazil. The domestic Brazilian demand schedule for Ethiopian coffee beans is as follows: Table 3.b. Price of Ethiopian coffee beans Quantity of Ethiopian coffee beans (per pound) demanded by Brazilians (pounds) $4.00 1,000 $3.50 2,500 $3.00 4,000 $2.50 5,000 $2.00 7,000Graph 2.a. - Ethiopian Supply (S) and Brazilian Demand $5.00 - $4.50 - $4.00- $3.50- $3.00 - Price $2.50 - 32.00- O $1.50- $1.00 - $0.50 - 40.00 - 1,000 2.000 3.000 4,000 5.000 6,000 7,000 8.000 9.000 10.000 11,000 12,500 QuantityNow suppose that Ethiopian coffee beans can also be sold in Canada. The Canadian demand schedule for Ethiopian coffee beans is as follows: Table 3.C. Price of Ethiopian coffee beans Quantity of Ethiopian coffee beans (per pound) demanded by Canadians (pounds) $4.00 1,000 $3.50 2,500 $3.00 3,000 $2.50 5.000 $2.00 5.500Graph 2.b. - Ethiopian Supply (S) and Canadian Demand $5.00 - $4.50 - $4.00 - $3.50 - $3.00 - Price $2.50 - $2.00 - $1.50 - $1.00 - $0.50 - $0.00 - 0 1.000 2,000 3,000 4,000 5.000 6.000 7.000 8.000 9,000 10,000 11,000 12,500 QuantityTable 3.d. Price of Ethiopian Quantity of Quantity of Total Ethiopian coffee beans Ethiopian coffee Ethiopian coffee coffee beans beans demanded by beans demanded by demanded Brazilians Canadians (per pound) (pounds) (pounds) (pounds) $4.00 1.000 1.000 Enter your response here.) $3.50 2,500 2.500 Enter your response here.) $3.00 3,000 4,000 Enter your response here.) $2.50 5,000 5,000 Enter your response here.) $2.00 5.500 7.000 Enter your response here.)Graph 2.c. depicts the individual demand curves for both Brazil and Canada, the new combined demand curve, and the supply curve for Ethiopian coffee beans. Graph 2.c. - Ethiopian Supply (S), Brazilian Demand Canadian Demand (+) and Total Combined Demand $5.00 - $4.50 $4.00 $3.50- $3.00 - Price $2.50 $2.00 $1 50 $1.00 $0.50 $0.00 - 1,000 2,000 3,000 4,000 5,000 8,000 7,000 8,000 9,000 10,000 11,000 12,500 Quantity