Choice in a World of Scarcity

Question 1

Answer the following similar questions.

  1. Nathan can mow 12 lawns in a day or prune 36 trees in a day. Draw Nathan’s production possibilities curve for mowing lawns and pruning trees. Assume the production possibilities curve is linear and put the quantity of lawns mowed per day on the horizontal axis and the quantity of trees pruned per day on the vertical axis.
  2. David can mow four lawns in a day or plant four trees in a day. Draw David’s production possibilities curve for mowing lawns and planting trees. Again, assume a linear production possibilities curve and put the quantity of lawns mowed per day on the horizontal axis.  What is David’s opportunity cost of planting trees?  What is David’s opportunity cost of mowing lawns?
  3. Given the production information in parts a and b above, who has the comparative advantage in planting trees? Mowing lawns?

 

Question 2

The table below describes the production possibilities for Germany and Turkey.  Answer the following questions.  Use formulas to show calculations for parts d thru i.

 

Annual Production Germany Turkey
T-Shirts 1,800 500
Optical Instruments 600 1,000

 

  1. Graph Germany’s and Turkey’s production possibilities curve individually.
  2. Graph the production possibilities curve for the combined output of the 2 nations.
  3. What is the slope of Germany’s production possibilities curve?
  4. What is the slope of Turkey’s production possibilities curve?
  5. What is the opportunity cost of producing T-shirts in Germany?
  6. What is the opportunity cost of producing T-shirts in Turkey?
  7. What is the opportunity cost of producing optical instruments in Germany?
  8. What is the opportunity cost of producing optical instruments in Turkey?
  9. In which good does Germany have a comparative advantage?
  10. In which good does Turkey have a comparative advantage?
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