The paper "Problem Solving Process in Economics" is a great example of a Macro & Microeconomics assignment. Farmer’ s opportunity cost of producing 1 pound of meat is two pounds of potatoes simply indicates what the farmer gives up in order to produce a pound of meat. This means that in order for a farmer to produce 1 pound of meat. Rancher’ s opportunity cost of producing 1 pound of meat is 1/8 pound of potatoes illustrates the ease at which a farmer can produce meat instead of potatoes. Rancher has a comparative advantage in producing meat instead of producing potatoes (Mankiw, 52). Question 3 a) Production opportunities for Months needed to produce one car Months needed to produce a tone of grains number of cars produced in 12 months Quantity of grains produced in 12 months Car Grains (tons) Cars Grains American 3 months/car 1.2 months/ton 4 10 Japanese 3 months/car 2.4 months/ton 4 5 b) Production possibility frontier of American in a year Production possibility frontier for Japanese in a year c) In the USA, the opportunity cost for producing a car is 2.5 tons of grains while that of producing 5 tons of grains is 2 cars. In Japan, the opportunity cost of producing a car is 1.25 tons of grains while that of producing 5 tones of grains is 4 cars.
Opportunity costs Producing 1 car Producing 5 tons of grains America 2.5 tns of grains 2 cars Japan 1.25 tns of grains 4 cars d) Production of grains in America is an absolute advantage. This is because it can produce more grains within a year as compared to Japan which produces only 5 tons grains in a year (Mankiw, 52). e) Japan has a comparative advantage in producing cars while American has a comparative advantage in producing grains. f) Without trade America produces 200m cars and 500 m tons of grains while Japan produces 200 m cars and 250 m tons of grains. g) In a situation of trade, Japan will have to consume 4 cars from America when producing 5 tones of grains.
On the other hand, America may consume 4 cars from Japan while it produces 10 tons of grains. Question 4 a) Opportunity cost Pat: 4 hours brewing a gallon of beer Kris: 6 hours brewing a gallon of beer Absolute advantage Pat’ s production of pizza is an absolute advantage since he can only use 2 hours to make a pizza compared to Kris who uses 4 hours to produce a single pizza.
ReferencesMankiw, Gregory. Principles of Economics. Mason, OH: Thomson/South- Western, 2007.