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UNA QM 291 - Homework 2

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EC-252: Principles of MicroeconomicsSpring 2020Homework #2Due Date: Friday, February 14, 2020Name: _______________________________________________________________________Leslie and Dan can produce chairs and tables according to the following labor production schedule:Leslie DanChairs 1 chair every 30 minutes 1 chair every 10 minutesTables 1 table every 20 minutes 1 table every 1 hourFill out the following table to display the numbers of chairs and tables each could produce in an 8-hour workday if they exclusively made just the one item.Leslie DanChairs 16 48Tables 24 8Who has an absolute advantage in producing chairs?DanWho has an absolute advantage in producing tables?Leslie1In order to make 1 table, how many chairs must Leslie give up?2/3In order to make 1 table, how many chairs must Dan give up?6Who has a LOWER opportunity cost to produce 1 table?LeslieConsequently, who has a comparative advantage in producing tables?LeslieIn order to make 1 chair, how many tables must Leslie give up?3/2In order to make 1 chair, how many tables must Dan give up?1/6Who has a LOWER opportunity cost to produce 1 chair?DanConsequently, who has a comparative advantage in producing chairs?Dan2Who has a specialization in chairs?DanWho has a specialization in tables?LeslieIf Leslie makes all tables and Dan makes all chairs, how much is our 2-person society producing?Chairs: 48 Tables: 24If Leslie offered 1 table in exchange for some amount of chairs, what amount would be accepted by Dan?Chairs < 6If Leslie offered 1 table in exchange for some amount of chairs, what amount would be accepted by Leslie?Chair >2/3Consequently, what is the range of chairs that would need to be offered in exchange for 1 table that would be acceptable to both sides?2/3 < chair < 63Leslie makes all tables. Dan makes all chairs. What do their pre-trade baskets look like in terms of (chairs, tables)?Leslie:( 0 , 24 ) Dan: (48 , 0 )Leslie then trades 1 table to Dan in exchange for 2 chairs. What do their post-trade baskets look like in terms of (chairs, tables)?Leslie:(2 ,23 ) Dan: (46 , 1 )Draw the individual PPFs for both Leslie and Dan below. Include the following points on the graph: Leslie’s all-chair endpoint, Leslie’s all-table endpoint, Dan’s all-chair endpoint, and Dan’s all-table endpoint. Also, label which PPF belongs to which player.0 10 20 30 40 50 60051015202530PPFs for Leslie and DanChairsTables4Draw the societal PPF below. Include the following points on the graph: all-chair endpoint, all-table endpoint, and the “midpoint” where the kink is where one player is making all chairs and the other is making all tables. Also, label which section of the PPF shows the contribution of which player.0 10 20 30 40 50 60 7005101520253035Societal PPFChairsTables5Now let’s talk about prices…How many chairs and tables would Dan produce if the price of chairs (Pc) was $1,000 and the price of tables (Pt) was $1? Chairs: 48 Tables:0How many chairs and tables would Leslie produce if the price of chairs was $1,000and the price of tables was $1?Chairs: 16 Tables:0Consequently, how many chairs and tables would society produce if the price of chairs was $1,000 and the price of tables was $1?Chairs: 64 Tables:0How many chairs and tables would Dan produce if the price of tables was $750 and the price of chairs was $2?Chairs: 0 Tables: 86How many chairs and tables would Leslie produce if the price of tables was $750 and the price of chairs was $2?Chairs: 0 Tables: 24Consequently, how many chairs and tables would society produce if the price of tables was $750 and the price of chairs was $2?Chairs: 0 Tables: 32If Pc/Pt = 4 (so chairs sell at 4x the price of tables), how many chairs and tables willDan produce?Chairs: 48 Tables: 0If Pc/Pt = 4 (so chairs sell at 4x the price of tables), how many chairs and tables willLeslie produce?Chairs: 16 Tables: 0Consequently, if Pc/Pt = 4 (so chairs sell at 4x the price of tables), how many chairsand tables will society produce?Chairs: 64 Tables:07At what price ratio (Pc/Pt) will Dan be indifferent between producing chairs and tables?Pc/Pt = 1/6If Pc/Pt = 1/6 (so chairs sell at 1/6 the price of tables), how many chairs and tables will Dan produce?Chairs: 0 ≤ x ≤ 48 Tables: 8 – x/6If Pc/Pt = 1/6 (so chairs sell at 1/6 the price of tables), how many chairs and tables will Leslie produce?Chairs: 0 Tables: 24Consequently, if Pc/Pt = 1/6 (so chairs sell at 1/6 the price of tables), how many chairs and tables will society produce?Chairs: 0 ≤ x ≤ 48 Tables: 32 – x/6At what price ratio (Pc/Pt) will Leslie be indifferent between producing chairs and tables? 3/2If Pc/Pt = 3/2 (so chairs sell at 3/2 the price of tables), how many chairs and tables will Dan produce?Chairs: 48 Tables:08If Pc/Pt = 3/2 (so chairs sell at 3/2 the price of tables), how many chairs and tables will Leslie produce?Chairs: 16-2/3X Tables: 0=<X=<24Consequently, if Pc/Pt = 3/2 (so chairs sell at 3/2 the price of tables), how many chairs and tables will society produce?Chairs: 64-2/3X Tables: 0=<X=<24If Pc/Pt = 2/3 (so chairs sell at 2/3 the price of tables), how many chairs and tables will Dan produce?NOTE THAT 1/6 < 2/3 < 3/2Chairs: 48 Tables: 0If Pc/Pt = 2/3 (so chairs sell at 2/3 the price of tables), how many chairs and tables will Leslie produce?Chairs: 0 Tables: 24Consequently, if Pc/Pt = 2/3 (so chairs sell at 2/3 the price of tables), how many chairs and tables will society produce?Chairs: 48 Tables: 249If Pc/Pt < 1/6, how many chairs and tables will Dan produce?Chairs: 0 Tables: 8If Pc/Pt < 1/6, how many chairs and tables will Leslie produce?Chairs: 0 Tables: 24Consequently, if Pc/Pt < 1/6, how many chairs and tables will society produce?Chairs: 0 Tables: 32If Pc/Pt > 3/2, how many chairs and tables will Dan produce?Chairs: 48 Tables:0If Pc/Pt > 3/2, how many chairs and tables will Leslie produce?Chairs: 16 Tables:0Consequently, if Pc/Pt > 3/2, how many chairs and tables will society produce?Chairs: 64 Tables: 010Fill in this table. The productions are listed as (chairs, tables).Pc/PtLeslie Dan Society1/10 ( 0 , 24 ) ( 0 , 8 ) ( 0 , 32 )1/8 ( 0 , 24 ) ( 0 , 8 ) ( 0 , 32 )1/6 ( 0 , 24 ) ( 0=< x<=48 ,8-1/6X)(0 ≤ x ≤ 48 , 32 – x/6)1/2 ( 0 , 24 ) ( 48 , 0 ) ( 48 , 24 )2/3 ( 0 , 24


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