Homework 02: Choice In A World Of Scarcity

Homework 02choice In A World Of Scarcityquestionpoints130270total100qu

Answer the following similar questions. a) Nathan can mow 12 lawns in a day or prune 36 trees in a day. Draw Nathan’s production possibilities curve for mowing lawns and pruning trees. Assume the production possibilities curve is linear and put the quantity of lawns mowed per day on the horizontal axis and the quantity of trees pruned per day on the vertical axis. b) David can mow four lawns in a day or plant four trees in a day. Draw David’s production possibilities curve for mowing lawns and planting trees. Again, assume a linear production possibilities curve and put the quantity of lawns mowed per day on the horizontal axis. What is David’s opportunity cost of planting trees? What is David’s opportunity cost of mowing lawns? c) Given the production information in parts a and b above, who has the comparative advantage in planting trees? Mowing lawns? Question 2 The table below describes the production possibilities for Germany and Turkey. Answer the following questions.

Use formulas to show calculations for parts d thru i . Annual Production Germany Turkey T-Shirts 1, Optical Instruments ,. Graph Germany’s and Turkey’s production possibilities curve individually. 1. Graph the production possibilities curve for the combined output of the 2 nations. 1. What is the slope of Germany’s production possibilities curve? 1. What is the slope of Turkey’s production possibilities curve? 1. What is the opportunity cost of producing T-shirts in Germany? 1. What is the opportunity cost of producing T-shirts in Turkey? 1. What is the opportunity cost of producing optical instruments in Germany? 1. What is the opportunity cost of producing optical instruments in Turkey? 1. In which good does Germany have a comparative advantage? 1. In which good does Turkey have a comparative advantage?

Paper For Above instruction

Understanding the concept of opportunity cost and comparative advantage is fundamental to the study of economics, particularly in analyzing how individuals and nations allocate scarce resources. This paper explores these concepts through the specific scenarios provided involving Nathan and David, as well as the production possibilities of Germany and Turkey. By examining the production possibilities frontiers (PPFs) and calculating opportunity costs, we can better understand the principles that facilitate efficient resource allocation and mutually beneficial trade.

Part 1: Nathan’s and David’s Production Possibilities

Nathan’s production capacity demonstrates the trade-off between mowing lawns and pruning trees. With the ability to mow 12 lawns or prune 36 trees daily, Nathan’s PPF can be represented as a straight line connecting these two points on a graph where the x-axis measures lawns mown and the y-axis pruned trees. The slope of this PPF indicates the opportunity cost of one good in terms of the other. Specifically, the slope is calculated as the change in trees pruned divided by the change in lawns mowed: 

Opportunity cost of 1 lawn in terms of trees = 36/12 = 3 trees

Similarly, David can mow four lawns or plant four trees per day. The opportunity cost of planting trees, in this case, shows how many lawns must be sacrificed for each tree planted. The opportunity cost of planting one tree is 1 lawn, and vice versa, indicating a mutual trade-off where the opportunity cost is equal for both goods.

By examining the slopes of Nathan’s and David’s PPFs, it becomes clear that Nathan’s opportunity cost of pruning a single tree is 1/3 of a lawn (since he must give up 1/3 lawn to prune one tree), while David’s opportunity cost of planting a tree is 1 lawn, and of mowing a lawn is 1 tree. The slopes reflect the relative efficiency of each individual in producing the respective goods.

Comparative advantage involves comparing opportunity costs: the individual with the lower opportunity cost of a good has the comparative advantage. Nathan’s opportunity cost of pruning one tree is 1/3 lawn, whereas David’s is 1 lawn; hence, Nathan has a comparative advantage in pruning trees. Conversely, David’s opportunity cost of mowing a lawn is 1 tree, which is lower than Nathan’s (if calculated similarly), suggesting he has a comparative advantage in mowing lawns.

Part 2: Production Possibilities of Germany and Turkey

The scenario with Germany and Turkey involves calculating opportunity costs associated with producing T-shirts and optical instruments. These countries’ production possibilities frontiers are derived from their maximum outputs, which are necessary to compute slopes and opportunity costs.

Suppose Germany can produce 10 T-shirts or 5 optical instruments annually. Its PPF slope is calculated as the change in optical instruments divided by the change in T-shirts: (−5/10) = −0.5. This slope indicates that for each T-shirt produced, Germany sacrifices half an optical instrument, which is its opportunity cost per unit of T-shirt. Similarly, Turkey can produce 8 T-shirts or 8 optical instruments; thus, its slope is (−8/8) = −1, indicating a higher trade-off in terms of optical instruments for each T-shirt produced.

The opportunity costs of producing each good in each country guide us to identify comparative advantages. Germany’s lower opportunity cost in T-shirts (0.5 compared to Turkey’s 1) grants it a comparative advantage in T-shirt production. Conversely, Turkey has a lower opportunity cost in producing optical instruments (since it sacrifices a maximum of 1 T-shirt for 1 optical instrument), giving it a comparative advantage in optical instruments.

Graphical representation of their individual PPFs would show linear frontiers with slopes equivalent to their opportunity costs. The combined PPF for both nations would be a concave frontier if we assume specialization based on comparative advantages, illustrating the gains from trade and specialization.

This analysis underscores the importance of opportunity costs and comparative advantages in international trade, emphasizing how countries can maximize efficiency and resource utilization by focusing on the production of goods for which they have a comparative edge.

Conclusion

By calculating opportunity costs and analyzing production possibilities, individuals and nations can make informed decisions about resource allocation and trade. Nathan and David’s scenarios demonstrate the principles of opportunity cost and comparative advantage at an individual level, while the Germany-Turkey example extends these principles to international economics. Recognizing these concepts allows for more efficient economic outcomes, fostering growth and specialization that benefit all parties involved.

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