Question

In: Economics

Assume that workers in Bulgaria and the U.K. can produce the following (in tons per worker...

Assume that workers in Bulgaria and the U.K. can produce the following (in tons per worker per year):

U.S. production/ consumption before trade

U.S. Production after specialization

US consumption after specialization

US Gains from trade

Mexico production/ consumption before trade

Mexico production after specialization

Mexico consumption after specialization

Mexico Gains from trade

Crops

Bulgaria 4

U.K. 10

Machines

OR 8

OR 10

a) Which country’s producers have an absolute advantage in producing (a)crops, and (b) machines? Explain.

b) Which country’s producers have a comparative advantage in producing (a) crops, and (b) machines? Show your results in a table similar to the one above. Who should specialize in which product?

Crops

Machines

Bulgaria

U.K.

OR

c) If each country has 10 workers, how much would each country produce if they decided to trade? Bulgaria:___________________________ U.K.________________________

Graphs and Math in Economics

Suppose that you have the following supply and demand functions, graph your functions on the graph below:

Demand:P=50–0.5Q Supply: P=2+Q

b) The horizontal intercept is_______________________

c) The vertical intercept is________________________

d) The slope of the supply curve is________________________

e) Equilibrium price is ______________ and quantity is _____________________

f) Using the demand curve, if P = 10, then Q is________________________

Expert Solution

ans 1

	Crops	Machines
Bulagria	4	8
UK	10	10

ans a)

absolute advantage

UK has absolute advantage in production of both crops and machines because more of both can be produced in UK using one unit of labor as compared to Bulgaria

crops- UK

machine- UK

ans b)

comparative advantage

for finding out comparative advantage , we draw a table representing opportunity cost of two goods in two countries

	Crops	Machines
Bulagria	2 machines	1/2 crops
UK	1 machine	1 crops

here we can see that opportunity cost of crops is higher in Bulgaria as compared to UK and UK has lower opportunity cost of crops so UK has comparative advantage in production of Crops. Bulgaria's opportunity cost is less as compared to UK in the production of machines so Bulgaria has comparative advantage in the production of machines

bulgaria- machine

UK crops

c) if each has 10 workers

then bulagria will produce machines = 8*10=80

then UK will produce crops = 10*10=100

ans 2

Demand:P=50–0.5Q Supply: P=2+Q

demand curve P=50–0.5Q

when P=0

Qd= 50/0.5 = 100 so this will be horizontal intercept of demand curve

when Qd = 0

P= 50 so this will be vertical intercept of demand curve

slope of Demand curve = dP/dQd = -0.5

supply curve :P=2+Q

when P=0

Qs= -2 so this will be horizontal intercept of supply curve

when Qs = 0

P= 2 so this will be vertical intercept of supply curve

slope of supply curve = dP/dQs = 1

b) The horizontal intercept is_______________________

c) The vertical intercept is________________________

d) The slope of the supply curve is________________________

all these are answered above , questions were not clear,so i calculated for both demand and supply

equilibrium is determined where both demand= supply and equilibrium price from both demand and supply functions are equal

50–0.5Q =2+Q

48 = 1.5 Q

Q= 32

P= 2+Q= 2+32= 34

e) Equilibrium price is 34 and quantity is 32

f) Using the demand curve, if P = 10, then Q is

when P= 10

P= 50-0.5Qd

10 = 50 - 0.5Qd

0.5Qd= 40

Qd= 80

this will be demand

but supply will not be equal to demand as this is not equilibrium point

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