ILOs Understand the general nature, purposes, and techniques of literature with a sense of its relationship to life and culture. Recognize a representative selection of literary works by major writers….
Can someone have the comparative advantage in both products? Explain fully
Question 1:Michael, Esther, and Abhijit are best friends that own and run a landscaping business together. They provide two different services: planting trees and trimming trees.(12)- Michael works 5 hours per day. He can plant 6 trees in an hour or he can trim 3 trees in an hour.-Esther works 8 hours per day. She can plant 3 trees in an hour or trim 8 trees in an hour.-Abhijit works 6 hours per day. He can plant 5 trees in an hour or he can trim 5 trees in an hour.
|friends||Hours per day||trees||trim||Trees in an hour||Trim in an hour||In a 5 hour day||Opportunity cost per hr tree||Opportunity cost per hr trim|
|Michael||5||30||15||6||3||30/15||.5 trims||2 trees|
|Esther||8||24||64||3||8||15/40||2.66 trims||.375 trees|
|Abhijit||6||30||30||5||5||10/10||1 trim||1 tree|
a.Who has the absolute advantage in Planting Trees and who has the absolute advantage in Trimming Trees?(1) Esther has the absolute advantages in trimming trees and Michael has the absolute advantage in planting trees
b.Who has the comparative advantage in Planting Trees and who has the comparative advantage in Trimming Trees?(1). Michael has the comparative advantage in planting trees because his opportunity cost is .5 trims. Esther has the comparative advantage in trimming trees because her opportunity cost is .375 trees.
c.Can someone have the comparative advantage in both products? Explain fully.(2)
No its not posA country that has an absolute advantage in producing all goods still stands to benefit from trade with other countries, since the basis of the gains for trade is comparative advantage, not absolute advantage. It is not possible for an individual or country to have a comparative advantage in all goods.
d.Draw the joint production possibilities frontier for Tree Trimming and Tree Planting for Michael, Esther, and Abhijit for one day of work.(3)
e.Trade allows us to expand our production/consumption beyond what is possible without trade. Please explain (in your own words) how/why this is possible?(5)
Trade can benefit everyone in society because it
allows people to specialize in activities in which
they have a comparative advantage.
a.Your answer should be at least a paragraph long and should reference course material. While some opinion is fine, I am looking for you to explain the relevant concepts.
Question 2:Draw a graph (or graphs) for each of the following scenarios. In addition, make sure to fully explain your graphs and provide a detailed explanation of the economic issues/concepts underlying each scenario.(12)-
Each scenariois worth 3 points (1.5for the graph and 1.5for the explanation)
a.Willy owns a doggy daycare but he is having a difficult time paying his bills. The market for doggy daycare is very competitive and there are many different doggy daycares that provide an identical service. Despite his financial issues, Willy has decided to keep his business open, but he wants to exit the market over the long-run –once his lease is finished.(3)
b.You are hired to help the Canadian Government set tax policy. A member of government argues that all new taxes should be on businesses because consumers will be angry with any new taxes on them. You disagree and demonstrate that it doesn’t matter whether the tax is put on consumers or producers.(3)
c.Celine is landscaping her backyard and only wants to use two types of plants: spruce trees and kiwi trees. Spruce trees are not very expensive, but kiwi trees are very expensive. When the price of spruce trees goes up, Celine buys fewer kiwi trees, but more spruce trees.(3)
d.Mariana runs a business installing solar-panel systems on people’s roofs in Northern BC. She is the only business providing this service in Northern BC. Mariana wants to raise her prices because she doesn’t have any competition, but she realizes that her revenues will decline if she raises her prices.(3)
Question 3:The market for toilet paper was significantly impacted by the COVID-19 pandemic, with shortages across the country. The following equations describe supply and demand for toilet paper prior to COVID-19:(9)𝑆𝑢𝑝𝑝𝑙𝑦:𝑄=11𝑃𝐷𝑒𝑚𝑎𝑛𝑑:𝑄=76−2𝑃
a.What is the market equilibrium price and quantity in the toilet paper market prior to COVID-19?(1)
b.Now, due to COVID-19, the demand curve for toilet paper increases to: 𝑄=98−2𝑃. What is the new market equilibrium price and quantity for toilet paper?(1)
c.Calculate the consumer and producer surplus for the equilibriums calculated in parts (a) and (b). (2)d.Now, the price of wood pulp (the key ingredient in toilet paper) has increased by over 200%. What impact (if any) will this have on the market for toilet paper? Explain fully.(2)
e.Assuming that the market for toilet paper is perfectly competitive, how would the equilibrium price and quantity change if the market was an oligopoly? What about if it was a monopoly? (3)
Question 4:The market for vegetable seeds has been significantly impacted by the COVID-19 pandemic, with many people wanting to try growing their own food for the first time. The following equations describe supply and demand in the vegetable seed market prior to COVID-19: (11)
a.What is the market equilibrium price and quantity in the vegetable seed market prior to COVID-19?(1)
b.Now, the government decides to impose a price ceiling of $7 to protect consumers. What is the new equilibrium quantity and price after the government imposes the price ceiling? (1)
c.Now, the Seed Producer Alliance convinces the government to end the price ceiling and replace it with a $1 tax on consumers. What is the new equilibrium quantity, the price paid by buyers,the price received by sellers, and governments tax revenueafter the tax? (3)d.Would it be better for consumers if the tax was placed on sellers? Explainfully. (2)e.Calculate the consumer and producer surplus for the equilibriums in (a), (b), and (c). (3)f.Which equilibrium is the best for society? (1)
Question 5:Kofi is the only photographer in Prince Rupert. The price in the market for photography sessions is determined by how many sessions Kofi decides to sell. For simplicity, assume that it doesn’t cost Kofi anything to do a photography session (his fixed costs, variable costs, and therefore his marginal costs are zero). The market demand curve for photography sessions, as well as the equation for Kofi’s marginal revenue are:(16)𝐷𝑒𝑚𝑎𝑛𝑑:𝑃=180−13𝑄𝑀𝑎𝑟𝑔𝑖𝑛𝑎𝑙𝑅𝑒𝑣𝑒𝑛𝑢𝑒:𝑀𝑅=180−23𝑄
a.If Kofi wants to maximize his profits, how many photography sessions will he sell and what will the market price be? (2)
a.Hint: use the standard condition for profit maximization to solve for Q.
b.Now, Kofi’s apprentice Zahra decides to open up a competing photography company. Zahra has the same cost structure as Kofi. Instead of competing, Kofi decides to ask Zahra to cooperate with him so they can each maximize their revenues/profits. How many photography sessions do they each book, what is the market price, and how much profit do they each earn?(2)
c.Now, Zahra wants to make a bit more money and so she decides to sell an extra 15 photography sessions than what she agreed to with Kofi. What is the market price now? What are Zahra and Kofi’s profits now?(2)
d.Now, Kofi is angry with Zharafor breaking their deal, so he decides he will also sell an extra 15photography sessions. With Kofi and Zhara each selling 15extra photography sessions above their initial agreement, what is the market price? What are Zahra and Kofi’s profits now? (2)
e.Use your answers to (b), (c), and (d) to fill out the table for the prisoner’s dilemma (Oligopoly example) for Kofi and Zahra and identify the Nash Equilibrium. (3)
ZahraCompete (QZ=__)Cooperate (QZ=__)KofiCompete (QK=__)(__, __)(__, __)Cooperate (QK=__)(__, __)(__, __)
f.The tension between cooperation and competition are important components of our economies and societies. Please explain, in your own words, why cooperation is so difficult to achieve in so many situations and the consequences, as well as the benefits,of this reality.(5)
a.Your answer should be at least a paragraph long and should reference course material. While some opinion is fine, I am looking for you to explain the relevant concepts