Intro to Econ Microeconomics (ECON-1102-005) Assignment #1 (10%), Due January 26, 2024, 5 PM. 22 1If QD =30 - 5P, and P = 2, what is quantity demanded? a. 40 b. 20 c. 30 d. 10 23. Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per vear, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 10 workers in each country. No trade occurs between the two countries. Boatland produces and consumes 25 units of wheat and 125 units of fish per year, while Farmland produces and consumes 125 units of wheat and 25 units of fish per year. If trade were to occur, Boatland would trade 100 units of fish to Farmland in exchange for 100 units of wheat. If Boatland no longer grew any of its own wheat, how many units of fish could it now consume along with the 100 units of imported wheat? a. 25 units b. 75 units . 150 units d. 250 units 24. Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns and why? 25. Suppose that a worker in Taiwan can make 2 TVs or 10 pairs of shoes per week, and a worker in Korea can make 3 TVs or 20 pairs of shoes per week. a. In what sense do TVs and shoes cost less in Korea than in Taiwan? b. In what sense do TVs cost less in Taiwan than in Korea? c. If Taiwan and Korea were to engage in trade, which country would export which good? d. How would the answer to the question in part change if a worker in Korea could make 4 TVs per week? Part I1: Briefly answer the following questions. 26. What would happen to the study of economics if scarcity disappeared? 27. One tradeoff society faces is between efficiency and equity. Define each term. If the Canadian government redistributes income from the rich to the poor, explain how this action affects equity as well as efficiency in the economy. 28. Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short run. 29. Suppose you have your own pizza delivery business and receive a call to deliver to a remote client. You need to decide whether to take the call. If you don't, there are no consequences, since someone else will. Based on the distance to the client, you calculate that it would cost you $5 to deliver and expect to receive $6 for the service. You also pay monthly rent for the car, which on average, based on past experience, comes down to about $2 per trip. Your time doesn't matter, as you have nothing more enjoyable or useful to do for the time being. How do you make this decision? What economic principle is at work in your decision process? 30. For your birthday, your friends have joined forces and offer you a choice among the following options (they will pay all expenses of your choice): A) A two-week trip to an exotic destination; B) A new, high-tech mountain bike, C) An annual pass to your preferred sports team games, and D) A dinner with your preferred celebrity. Suppose your subjective valuations of these options are as follows: A) $800, B) $700, C) $1500, and D) $1000. If you are a rational individual, you will obviously choose C, the annual pass, because it is the option of your highest valuation. a) What is your opportunity cost of choosing option C? Explain. b) Now, suppose your friends announce at the last minute a fifth option, E, a cheque of $1100. What is now your opportunity cost of choosing option C? ) As you can see, the theory of opportunity cost implies that the cost of an action depends on other, seemingly unrelated facts. Why does this make sense? Page 4
