Calculate the marginal opportunity cost of each combination.

Calculate the marginal opportunity cost of each combination..

Plot the PPC of a nation given by the following
data.
Combination Health Care All Other Goods
A 0 100
B 25 90
C 50 70
D 75 40
E 100 0
a. Calculate the marginal opportunity cost of each
combination.
b. What is the opportunity cost of combination C?
c. Suppose a second nation has the following data.
Plot the PPC, and then determine which nation
has the comparative advantage in which activity.
Show whether the two nations can gain from
specialization and trade.
Combination Health Care All Other Goods
A 0 50
B 20 40
C 40 25
D 60 5
E 65 0

Questtion 2


Using the following schedule, define the equilibrium
price and quantity. Describe the situation at a
price of $10. What will occur? Describe the situation
at a price of $2. What will occur?
Price
Quantity
Demanded
Quantity
Supplied
$1 500 100
$2 400 120
$3 350 150
$4 320 200
$5 300 300
$6 275 410
$7 260 500
$8 230 650
$9 200 800
$10 150 975

.4
Suppose the government imposed a minimum price
of $7 in the schedule of exercise 3. What would
occur? Illustrate.
66 Chapter 3 Markets, Demand and Supply, and the Price System
9781285531670, Economics, Ninth Edition, Boyes/Melvin – © Cengage Learning. All rights reserved. No distribution allowed without express authorization. Distributed by Grand

5. In exercise 3, indicate what the price would have to
be to represent an effective price ceiling. Point out
the surplus or shortage that results. Illustrate a price
floor and provide an example of a price floor.

15. Use an aggregate demand and aggregate supply
diagram to illustrate and explain how each of
the following will affect the equilibrium price
level and real GDP:
a. Consumers expect a recession.
b. Foreign income rises.
c. Foreign price levels fall.
d. Government spending increases.
e. Workers expect higher future inflation and
negotiate higher wages now

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