.The table below shows all the possible combinations of good X and good Y in Choiceland.

Point

Annual Production

of X

Annual Production of Y

A

0

1300

B

20

1200

C

45

900

D

60

600

E

70

350

F

75

0

(a)Draw a production possibility frontier for Choiceland on a scale diagram, with the production of X on the horizontal axis and the production of Y and the vertical axis.

(b)Label the point of production if the economy is producing 45 units of X and 600 units of Y.Compute the opportunity cost of producing an extra15 units of X (move to point D).

(c)Calculate the opportunity cost of producing a15 extra units of X if the economy were initially producing 60 units of X and 600 units of Y.

(d)Suppose that the technology associated with producing Y improves.Show on your diagram what happens to the production possibilities curve.

2.Assume we have two countries, the US and Mexico. Each country produces two goods,

Car Engines and Car Bodies. US can produce 10 Car Engines or 15 Car Bodies per day.Mexico can produce 40 Car Engines or 20 Car Bodies per day.Below shows the number of products that canbe made in each country in one day:

US

Mexico

Car Engines

10

40

Car Bodies

15

20

Fill in the following table, computing the opportunity costs.

US

Mexico

Car Engine

Car Bodies

Who has the absolute advantage in the production of Car Engines (circle one)? Why?

US Mexico because _______________________

Who has the absolute advantage in the production of Car Bodies (circle one)? Why?

US Mexico because _______________________

Who has the comparative advantage in the production of Car Engines (circle one)? Why?

US Mexico because _______________________

Who has the comparative advantage in the production of Car Bodies (circle one)? Why?

US Mexico because _______________________

If the two countries trade with each other, then the US should specialize in

_____________ and Mexico should specialize in _____________.

Production for both countries before trade is provided in the following chart.Say that U.S. will trade 8 car bodies and Mexico will trade 10 car engines. Fill in the rest of the chart to find the gains from trade after specialization and trade:

U.S. production/

consumption before trade

U.S.

Production after specialization

US consumption

after specialization

US Gains from trade

Mexico production/

consumption

before trade

Mexico

production after specialization

Mexico consumption after specialization

Mexico

Gains from trade

Car Engines

6

24

Car

Bodies

6

8

3.Assume that workers in Bulgaria and the U.K. can produce the following (in tons per worker per year):

Crops

Machines

Bulgaria

4

OR

8

U.K.

10

OR

10

a)Which country's producers have an absolute advantage in producing (a)crops, and (b) machines? Explain.

b)Which country's producers have a comparative advantage in producing (a) crops, and (b) machines?Show your results in a table similar to the one above. Who should specialize in which product?

Crops

Machines

Bulgaria

OR

U.K.

OR

c)If each country has 10 workers, how much would each country produce if they decided to trade?

Bulgaria:___________________________U.K.________________________

Graphs and Math in Economics

Suppose that you have the following supply and demand functions, graph your functions on the graph below:

Demand: P = 50 - 0.5QSupply:P = 2 + Q

b)The horizontal intercept is_______________________

c) The vertical intercept is________________________

d)The slope of the supply curve is________________________

e)Equilibrium price is ______________ and quantity is _____________________

f)Using the demand curve, if P = 10, then Q is________________________