1. Assume for Namibia that the opportunity cost of each hut is 200 bowls. Which
ID: 1126177 • Letter: 1
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1. Assume for Namibia that the opportunity cost of each hut is 200 bowls. Which of these pairs of points could be on Namibia's production possibilities frontier? a. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls) b. (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls) c. (300 huts, 50,000 bowl) and (200 huts, 60,000 bowls) d. (300 huts, 60,000 bowls) and (200 huts, 80,000 bowls) 2. Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of com or 6 units of wheat per year Each nation has 10 workers. For many years the two countries traded, each completely specializing according to their respective comparative advantages. Now, however, war has broken out between them and all trade has stopped. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of con and 30 units of wheat. The war has caused the combined yearly output of the two countries to decline by a. 10 units of corn and 10 units of wheat. b. 20 units of corn and 20 units of wheat. c. 30 units of corn and 30 units of wheat. d. 40 units of corn and 40 units of wheat 3. Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then how will this affect the market for saddle shoes? a. The supply curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity b. The supply curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity c. The demand curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity d. The demand curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantityExplanation / Answer
Ans1) d is the correct option. 300 huts 60000 bowls and 200 huts 80000 bowls. In order to get one hut nambia has to give up 200 bowls so the opportunity cost for 300 huts is 60000 if the production is reduced by 100 huts it will be able to increase production of bowls by 80000-60000= 20000
Ans 2) c is the correct option. 30 units of corn and 30 units of wheat, the concept here is of comparative advantage Sylvania can't make 10 units of corn if they have to trade 30 units of wheat to get the 30 units of corn from Freedonia. They have to put all their time into making Wheat so they have the full 30 units available to trade. Likewise for Freedonia, the only way they have 30 units of corn available to trade is to put all their workers on corn, make 60 units, and trade half for corn.
Ans3) c is the correct option, saddle shoes become popular meaning now more people demand these shoes, demand for saddle shoes shifts to the right the supply curve will remain the same so equilibrium price will increase causing the shortage of shoes because demand is greater than supply
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