Question One - Abdullah loves donuts. The table below reflects the value Abdullah places on each donut he eats:
|
Value of first donut
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$0.60
|
|
Value of second donut
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$0.50
|
|
Value of third donut
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$0.40
|
|
Value of fourth donut
|
$0.30
|
|
Value of fifth donut
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$0.20
|
|
Value of sixth donut
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$0.10
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a. Use this information to construct Abdullah's demand curve for donuts.
b. If the price of donuts is $0.20, how many donuts will Abdullah buy?
c. Show Abdullah's consumer surplus on your graph. How much consumer surplus would he has at a price of $0.20?
d. If the price of donuts rose to $0.40, how many donuts would he purchase now? What would happen to Abdullah's consumer surplus? Show this change on your graph.
Question Two - Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.
|
|
Hours Needed to Make 1
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Quantity Produced in 2400 Hours
|
|
Car
|
Airplane
|
Cars
|
Airplanes
|
|
Japan
|
30
|
150
|
80
|
16
|
|
Korea
|
50
|
150
|
48
|
16
|
1- What is Japan's opportunity cost of one car?
2- Suppose Korea decides to increase its production of cars by 18. What is the opportunity cost of this decision?
3- In what product Japan has an absolute advantage? and in what product Korea has an absolute advantage?