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Suppose we have the following information about the productivity of two industries in USA and Mexico. The unit labor requirements are given in the following table.
a) Plot production possibilities frontier (PPF) for each country assuming that each country has 120 units of labor. Label axes and intercepts.
b) Provide brief economic interpretation of the slope of PPF in your graphs. Is the principle of increasing costs satisfied on your graph? Justify your answer briefly.
c) Define absolute advantage. Which country has absolute advantage in the production of which good in the example above?
d) Compute opportunity costs for each good in each country. Determine which country has comparative advantage in producing cars and which in engines? Why?
e) What is the most likely pattern of specialization in production and trade between these countries?
f) Consider a situation in which: (i) USA consumes 30 engines and 10 cars; (ii) Mexico consumes 10 cars and 30 engines. Is this consumption pattern attainable if there is no trade between countries? What if countries trade? Briefly justify your answer.
A computer is purchased for P=$86,919, has a service life of n=7 years, and a salvage value of $5,000. At an interest rate of 15%, determine the capital recovery amount for this project.
Electric utility companies usually operate their most modern and efficient equipment continuously (i.e around the clock) and use their older and less efficient equipment only to meet periods of peak electricity demand. What does this imply for the sh..
A sample that does not over represent any portion of the population also whose responses can therefore be safely generalized
Consider a market with a demand curve of P=10-Q and a supply curve of P=Q. Before the imposition of a tax, equilibrium quantity is 5, and equilibrium price is $5 (verify this). If a tax of $5 per unit is placed on this market, quantity traded falls t..
The annual opperating cost of the new operating machine is $7,000. The company uses a 20% MARR. Calculate the annual equivalent total cost for each machine. Would you replace the old machine at this time?
Use the above graph to construct a production possbililites curve placing corn on vertical axis and paper on the horizontal axis. What is the marginal opportunity cost of producing the first unit of paper? The marginal opportunity cost of producing t..
The economy's factors of production are not equally suitable for producing different types of goods. This principle generates:
What is the monopolist's profit under the following conditions? The profit-maximizing price charged for goods produced is $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units, marginal cost is $8, and..
Find the demand for L and R. (Hint: Use your result from part 3 and the budget constraint.) Now assume that the price of right shoes increases. What will be the substitu- tion eect from this price change? Explain.
A road building contractor has received a major highway construction contract that will require 50,000 m^3 of crushed stone each year for 5 years. The stone can be obtained from a quarry for $7.80/m^3. As an alternative, the contractor has decided to..
Suppose a country "X" is facing recession. What fiscal and monetary policy will the central bank and the government use to stabilize the economy!! What tools do the central bank and the government have to impact economy!!
q1. 1. give an example of an organization or business in your area that performs the form function and explain why you
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