Table B is provided above. Using Table A, fill out Table B. You should have a nu
ID: 1252387 • Letter: T
Question
Table B is provided above. Using Table A, fill out Table B. You should have a number and a unit in each cell of the table. For Alex, what is the opportunity cost of producing a calzone?
A) 0.333 calzones
B) 3 calzones
C) 0.2 calzones
D) 5 calzones
E) 0.333 pizzas
F) 3 pizzas
G) 0.2 pizzas
H) 5 pizzas
Look at the Table B that you just filled out again. For Bob, what is the opportunity cost of producing a pizza?
A) 0.333 calzones
B) 3 calzones
C) 0.2 calzones
D) 5 calzones
E) 0.333 pizzas
F) 3 pizzas
G) 0.2 pizzas
H) 5 pizzas
Look at Table B. Now, examine comparative advantage. _________ has the comparative advantage in pizza production, and ________ has the comparative advantage in calzone production.
A) Alex, Alex
B) Alex, Bob
C) Bob, Alex
D) Bob, Bob
Suppose that Alex and Bob have 120 minutes until dinner is served. If they specialize according their comparative advantages from question 4, what will the TOTAL (Alex + Bob) output be? You will have to refer back to Table A.
A) Alex will produce 60 pizzas and Bob will produce 40 pizzas
B) Alex will produce 60 pizzas and Bob will produce 8 calzones
C) Alex will produce 20 calzones and Bob will produce 8 calzones
D) Alex will produce 20 calzones and Bob will produce 40 pizzas
E) Alex will produce 360 calzones and Bob will produce 24 pizzas
F) Alex will produce 40 calzones and Bob will produce 600 pizzas
Finally, suppose Alex and Bob decide to specialize and trade. Based on the times of production, they decide that it is fair for 1 calzone to be worth 4 pizzas. Look at your answer from question 5, and suppose that Alex gives 5 calzones to Bob. Thus, Bob gives 20 pizzas to Alex. After the trade, Alex now has:
A) 20 pizzas and 15 calzones
B) 20 pizzas and 25 calzones
C) 40 pizzas and 15 calzones
D) 40 pizzas and 25 calzones
E) 80 pizzas and 0 calzones
Look at what Alex has after the trade in question 6. Assuming the same 120 minutes until dinner, would Alex have been able to produce this combination of goods by himself without trade? You will have to refer back to Table A
Hint: You will have to see if Alex would have enough time to produce the combination of goods, and if so, having 'leftover' time means that the production level would be inefficient for him.
A) Alex would have been able to efficiently produce this level of output by himself
B) Alex would have been able to produce this output combination by himself, but it would have been inefficient for him to do so.
C) This output combination is unattainable for Alex to produce by himself.
Consider Bob's combination of pizza and calzones after the trade listed in question 6. After the trade, what does Bob have?
A) 20 pizzas and 15 calzones
B) 20 pizzas and 5 calzones
C) 40 pizzas and 15 calzones
D) 40 pizzas and 5 calzones
E) 0 pizzas and 5 calzones
Look at what Bob has after the trade. Assuming the same 120 minutes until dinner, would Bob have been able to produce this combination of goods by himself without trade?
A) Bob would have been able to efficiently produce this level of output by himself
B) Bob would have been able to produce this output combination by himself, but it would have been inefficient for him to do so.
C) This output combination is unattainable for Bob to produce by himself.
According to what we have studied so far in class, which of the following is true for supply curves?
A) Supply curves are downward sloping
B) Supply curves are upward sloping
C) Supply curves are always linear
D) Both B and C
Consider the demand for movie tickets. Suppose that 2 things happen simultaneously:
First, the price of popcorn (a movie ticket complement) decreases.
Second, the price of DVDs (a movie ticket substitute) decreases.
Both of these events will cause what to happen?
A) Both of these events each cause the demand for movie tickets to increase.
B) Both of these events each cause the demand for movie tickets to decrease.
C) Both of these events each cause the quantity demanded for movie tickets to increase.
D) Both of these events each cause the quantity demanded for movie tickets to decrease.
E) None of the above.
Suppose that Laura is a seafood enthusiast. She believes lobster is a normal good and that fish sticks are an inferior good. If Laura loses her job because she talks too much about seafood at work, what would we expect to happen?
A) Laura's demand for lobster will decrease and Laura's demand for fish sticks will decrease
B) Laura's quantity demanded for lobster will decrease and Laura's quantity demanded for fish sticks will decrease
C) Laura's demand for lobster will decrease and Laura's demand for fish sticks will increase
D) Laura's quantity demanded for lobster will decrease and Laura's quantity demanded for fish sticks will increase
E) Laura's demand for lobster will decrease and Laura's quantity demanded for fish sticks will increase
Consider the following two equations describing the market for Penn State shirts.
(1) Q = 60 - 4P
(2) Q = 2P
What is true about the equations? Equation (1) is a __________ equation while equation (2) is a _________ equation.
A) demand, demand
B) demand, supply
C) supply, demand
D) supply, supply
Solve the above equations for the equilibrium price and quantity.
A) P = $10, Q = 10
B) P = $10, Q = 20
C) P = $20, Q = 10
D) P = $20, Q = 20
What happens if the market price of Penn State shirts is $8?
Hint: You will have to find the quantity supplied and quantity demanded when the market price is $8. See page 73 in your note packet for some practice problems.
A) There will be a shortage of 10 shirts
B) There will be a shortage of 12 shirts
C) There will be a surplus of 10 shirts
D) There will be a surplus of 12 shirts
Explanation / Answer
See Table A above. _________ has the absolute advantage in pizza production, and ________ has the absolute advantage in calzone production. A) Alex, Alex Whoever can make more of each item has the absolute advantage. Table B is provided above. Using Table A, fill out Table B. You should have a number and a unit in each cell of the table. For Alex, what is the opportunity cost of producing a calzone? F) 3 pizzas Since it takes him 6 min to make a calzone, and 2 minutes to make a pizza, using 6 minutes for a calzone means he can't make 3 pizzas. Look at the Table B that you just filled out again. For Bob, what is the opportunity cost of producing a pizza? C) 0.2 calzones Since it takes 3 minutes for Bob to make a pizza, he gives up 1/5 of the time it takes to make a calzone for each pizza. Look at Table B. Now, examine comparative advantage. _________ has the comparative advantage in pizza production, and ________ has the comparative advantage in calzone production. C) Bob, Alex It costs Bob 1/5 a calzone to make a pizza, which is less than Alex's cost of 1/3 a calzone, so Bob has the comparative advantage in pizza. Alex has the comparative advantage in Calzone's because he only has to give up 3 pizzas to produce a calzone while Bob has to give up 5 pizza to produce a calzone. Suppose that Alex and Bob have 120 minutes until dinner is served. If they specialize according their comparative advantages from question 4, what will the TOTAL (Alex + Bob) output be? You will have to refer back to Table A. D) Alex will produce 20 calzones and Bob will produce 40 pizzas Since Bob has the Comparative Advantage in pizza he will make pizza. In 120 minutes, Bob can make 40 pizzas since each pizza takes him 3 minutes. Alex will produce calzones since he has a comparative advantage in calzones. He can produce 20 calzones in 120 minutes since each calzone takes 6 minutes. Finally, suppose Alex and Bob decide to specialize and trade. Based on the times of production, they decide that it is fair for 1 calzone to be worth 4 pizzas. Look at your answer from question 5, and suppose that Alex gives 5 calzones to Bob. Thus, Bob gives 20 pizzas to Alex. After the trade, Alex now has: A) 20 pizzas and 15 calzones Look at what Alex has after the trade in question 6. Assuming the same 120 minutes until dinner, would Alex have been able to produce this combination of goods by himself without trade? You will have to refer back to Table A Hint: You will have to see if Alex would have enough time to produce the combination of goods, and if so, having 'leftover' time means that the production level would be inefficient for him. C) This output combination is unattainable for Alex to produce by himself. Since Alex has 15 calzones, and 20 pizza, it would take 15*6=90 minutes to produce calzones, and 20*2=40 minutes to produce the pizza, 90+40=130 minutes Consider Bob's combination of pizza and calzones after the trade listed in question 6. After the trade, what does Bob have? B) 20 pizzas and 5 calzones Look at what Bob has after the trade. Assuming the same 120 minutes until dinner, would Bob have been able to produce this combination of goods by himself without trade? C) This output combination is unattainable for Bob to produce by himself. Bob has 5 calzone for a total of (5*15) 75 minutes, plus 20 pizza for a total of (20*3)=60 minutes. 60+75 gives 135 total minutes. ***We should always be better off by a trade after producing according to our comparative advantage. See the graph above. What is pictured in the graph? C) An increase in quantity demanded Quantity goes up, so increase. Increase in quantity demanded if it is movement along the curve. Increase in demand if the demand curve shifts outward. According to what we have studied so far in class, which of the following is true for supply curves? B) Supply curves are upward sloping I don't know what you have studied in class, but it is definitely not A. And since C is frequently untrue, it is probably B. Consider the demand for movie tickets. Suppose that 2 things happen simultaneously: First, the price of popcorn (a movie ticket complement) decreases. Second, the price of DVDs (a movie ticket substitute) decreases. Both of these events will cause what to happen? E) None of the above. Decrease in the price of a complement will cause an increase in demand. Decrease in the price of a substitute will cause a decrease in demand. Suppose that Laura is a seafood enthusiast. She believes lobster is a normal good and that fish sticks are an inferior good. If Laura loses her job because she talks too much about seafood at work, what would we expect to happen? C) Laura's demand for lobster will decrease and Laura's demand for fish sticks will increase Consider the following two equations describing the market for Penn State shirts. (1) Q = 60 - 4P (2) Q = 2P What is true about the equations? Equation (1) is a __________ equation while equation (2) is a _________ equation. B) demand, supply Demand curves have negative slopes while supply curves have positive slopes. Solve the above equations for the equilibrium price and quantity. B) P = $10, Q = 20 60-4P=2P 60=6P P=10 Plug into either equation to find Q. Q=2P Q=2(10)=20 What happens if the market price of Penn State shirts is $8? Hint: You will have to find the quantity supplied and quantity demanded when the market price is $8. See page 73 in your note packet for some practice problems. B) There will be a shortage of 12 shirts There will always be a shortage if Price is below equilibrium price. To find Q at P=8, plug into each equation. Quantity Demanded when P=8 is 60-4P=Q 60-4(8)=Q 60-32=Q Q=28 Quantity Supplied when P=8 is Q=2P Q=2(8)=16 So, the shortage (Qd>Qs) is 28-16=12
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