Assignment
Question One.
Abdullah loves donuts. The table below reflects the value Abdullah places on each donut he eats: Value of first donut $0.60 Value of second donut $0.50 Value of third donut $0.40 Value of fourth donut $0.30 Value of fifth donut $0.20 Value of sixth donut $0.10
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 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?