ECN351 GCU Essentials of Economic: Interdependence and Gains from Trade I have uploaded the questionsI have uploaded the textbook reference informationNo plagiarismReference page is required.You can input answers on this document as well. ECN 351 Essentials for Economics
TEXTBOOK: Mankiw, G.N (2018,2015) Essentials of Economics 8th edition, Cengage
Learning
QUESTION 1: If the United States could produce five televisions per hour of laborand
China could produce three televisions per hour of labor, would itnecessarily follow that the
United States should specialize intelevision production? Why or why not?
CLASS: HOW TO GET 100% ON THIS DQ AND PARTICIPATION
WATCH THE VIDEO: Know What You’re Talking About: https://youtu.be/XIGKPWfdP-w
1. FOLLOW THE RUBRIC. Be sure to cover every point based on what you’ve seen in the video and what you’ve read
in the class materials.
DQ 1 RUBRIC:
Who should produce: China or US? Why?
2
1
0
Explain comparative advantage.
3
1
0
TOTAL
5
QUESTION 2: Discuss the difference between absolute advantage and comparative
advantage. Which is more important in determining trade patterns? Justify your answer.
CLASS: KNOW WHAT YOU’RE TALKING ABOUT – DQ 2 VIDEO AND RUBRIC
1. WATCH THE VIDEO: Know What You’re Talking About: https://youtu.be/CbgkjDSlGXg
2. FOLLOW THE RUBRIC. Be sure to cover every point based on what you’ve seen in the video and what you’ve read
in the class materials.
DQ 2 Rubric:
Explain absolute advantage
2
1
0
Explain comparative advantage.
3
1
0
TOTAL
5
Chapter 1 Questions
1. Describe some of the trade-offs faced by each of the following:
a. a family deciding whether to buy a new car
b. a member of Congress deciding how much to spend on national parks
c. a company president deciding whether to open a new factory
d. a professor deciding how much to prepare for class
e. a recent college graduate deciding whether to go to graduate school
2. You are trying to decide whether to take a vacation. Most of the costs of the vacation
(airfare, hotel, and forgone wages) are measured in dollars, but the ben-efits of the vacation
are psychological. How can you compare the benefits to the costs?
3. You were planning to spend Saturday working at your part-time job, but a friend asks you
to go skiing. What is the true cost of going skiing? Now suppose you had been planning to
spend the day studying at the library. What is the cost of going skiing in this case? Explain.
4. You win $100 in a basketball pool. You have a choice between spending the money now
and putting it away for a year in a bank account that pays 5 percent interest. What is the
opportunity cost of spending the $100 now?
5. The company that you manage has invested $5 million in developing a new product, but
the development is not quite finished. At a recent meeting, your salespeo-ple report that the
introduction of competing products has reduced the expected sales of your new product to
$3 million. If it would cost $1 million to finish devel-opment and make the product, should
you go ahead and do so? What is the most that you should pay to complete development?
Chapter 2 #4 Question
4. An economy consists of three workers: Larry, Moe, and Curly. Each works 10 hours a day
and can pro-duce two services: mowing lawns and washing cars. In an hour, Larry can either
mow one lawn or wash one car; Moe can either mow one lawn or wash two cars; and Curly
can either mow two lawns or wash one car.
a. Calculate how much of each service is produced under the following circumstances, which
we label A, B, C, and D:
•
All three spend all their time mowing lawns. (A)
•
All three spend all their time washing cars. (B)
•
All three spend half their time on each activity. (C)
•
Larry spends half his time on each activity, while Moe only washes cars and Curly only
mows lawns. (D)
b. Graph the production possibilities frontier for this economy. Using your answers to part a,
identify points A, B, C, and D on your graph.
c. Explain why the production possibilities frontier has the shape it does.
d. Are any of the allocations calculated in part a inefficient? Explain.
Chapter 3 #4-6 Questions
4. Suppose that there are 10 million workers in Canada and that each of these workers can
produce either 2 cars or 30 bushels of wheat in a year.
a. What is the opportunity cost of producing a car in Canada? What is the opportunity cost of
pro-ducing a bushel of wheat in Canada? Explain the relationship between the opportunity
costs of the two goods.
b. Draw Canada’s production possibilities frontier. If Canada chooses to consume 10 million
cars, how much wheat can it consume without trade? Label this point on the production
possibilities frontier.
c. Now suppose that the United States offers to buy 10 million cars from Canada in exchange
for 20 bushels of wheat per car. If Canada continues to consume 10 million cars, how much
wheat does this deal allow Canada to consume? Label this point on your diagram. Should
Canada accept the deal?
5. England and Scotland both produce scones and sweaters. Suppose that an English worker
can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can
produce 40 scones per hour or 2 sweaters per hour.
a. Which country has the absolute advantage in the production of each good? Which country
has the comparative advantage?
b. If England and Scotland decide to trade, which com-modity will Scotland export to
England? Explain.
c. If a Scottish worker could produce only 1 sweater per hour, would Scotland still gain from
trade? Would England still gain from trade? Explain.
6. The following table describes the production possibili-ties of two cities in the country of
Baseballia:
Pairs of Red Socks Pairs per worker per hour
Boston
3
Chicago
2
Pairs of White socks per worker per hour
3
1
a. Without trade, what is the price of white socks (in terms of red socks) in Boston? What is
the price in Chicago?
b. Which city has an absolute advantage in the production of each color sock? Which city has
a comparative advantage in the production of each color sock?
c. If the cities trade with each other, which color sock will each export?
d. What is the range of prices at which trade can occur?
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