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Suppose that two people, Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes, she can raise 200 pounds of potatoes per year. If she devotes all her resources to raising chickens, she can raise 50 chickens per year. (If she apportions some resources to each, then she can produce any linear combination of chickens and potatoes that lies between those extreme points. If James devotes all his resources to growing potatoes, he can raise 80 pounds of potatoes per year. If he devotes all his resources to raising chickens, he can raise 40 chickens per year. (If he apportions some resources to each, then he can produce any linear combination of chickens and potatoes that lies between those extreme points.)
PotatoesChickensMichelle20050James8040What is Michelle's opportunity cost of producing potatoes?What is Michelle's opportunity cost of producing chickens?What is James' opportunity cost of producing potatoes?What is James' opportunity cost of producing chickens?Which person has an absolute advantage in which activities?Which person has comparative advantage in potatoes?Which person has comparative advantage in chicken?Suppose that they are thinking of each specializing completely in the area in which they have a comparative advantage, and then trading at a rate of 2.5 pounds of potatoes for 1 chicken, would they each be better off? Explain.How would you extend the above narrative to businesses, society as a whole or nations?
There are six companies in the industry. Assume their sales in the year 2006 are as follows, Determine the concentration ratio in the industry
Jim and Matt allocate their consumption between two goods: hats and bats. The price of hats is $4 each and the price of bats is $8 each. For Jim, the marginal utility of the last hat consumed was 8 and the marginal utility of the last bat was 24
An economy is operating with output $400 billion below its natural rate, and fiscal policymakers want to close this recessionary gap. The central bank agrees to adjust the money supply to hold the interest rate constant
If the costs are expected to increase by $250 each year for the next 4 years (i .e., through year 5), what is the equivalent annual worth of the costs (years 1 through 5) at an interest rate of 18% per year? Please use P=A(P/A, i, n) or whatever y..
1985/the cocacola comp was faced with soaring prices for sugar cane, 1-cent increase in the price of sugar cane raised its total cost by$20million.Rather than raise the price, comp looke for a cheaper input and replced cane suger with corn sugar.
A union organizes in one of the sectors, and it restricts supple to that sector by insisting that only those in the union are hired by firms in that sector. When the employees in this sector unionize, the supply of labor in that sector changes to..
(a) Consider a firm with the following production function. Q = 2*L*L + K*K. The price of capital (K) is $100 and the price of labor (L) is $50. The marginal product of labor is 4L and marginal product of capital is 2K.
A retail store faces a demand equation for Roller Blades given by: Q= 180-1.5P where Q is the number of pairs sold per month and P is the price per pair in dollars. a. The store currently charges P =$80 per pair. At this price, determine the number..
calculate the exact elasticity of demand in the following examples: Then tell if, in each case, demand is elastic, inelastic, or unitary elastic. (a) When the price of a deluxe car wash rises from $10.00 to $11.00, the number of daily customers fa..
The scores of students on the ACT college entrance examination in a recent year had a normal distribution with a mean of 18.6 and a standard deviation of 5.9. A simple random sample of 60 students who took the exam is selected for study
The following payoff table summarizes gross profits (before compensation), arising from two different levels of effort and factors outside of the manager's control (stage of the business cycle and resulting sales).
Assume that Maria Moneybags keeps $1000 in cash in her sock drawer. Over the first year, the inflation rate is 10%. What is the real inflation tax paid by Maria for this year. What is the real inflation tax paid by Maria for the second year
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