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8:38 AM Fri Jan 25 95% KHomework1 Homework 1.pdf Short Answer Questions I. Consider an economy that produces Military goods and Consumer goods, the PPF and the case that more recourses become available are given by the graph below. You are asked to identify how the followings affect the PPF. In order to get full mark, you have to figure out both the moving section (military goods section or consumer goods section) and the direction (outward or inward). Example: The population becomes more educated over time as the number of high school dropouts falls and the number of college graduates rises. Answer: both military goods section and consumer goods section would move outwards ) The unemployment rate declines from 7.3 to 4.5 percent of the labor force (which is still higher than the rate when full employment happens). b) Advances in telecommunications and new technology significantly contribute to economic growth over time c) The Congress and the President decide to allocate more resources to national defense. d) A nation participates in increased international trade with other nations of the world. ー Dashboard CalendarTo Do Notifications Inbox

8:39 AM Fri Jan 25 令95%- KHomework1 Homework 1.pdf Answer: both military goods section and consumer goods section would move outwards a) The unemployment rate declines from 7.3 to 4.5 percent of the labor force (which is still higher than the rate when full employment happens). b) Advances in telecommunications and new technology significantly contribute to economic growth over time. c The Congress and the President decide to allocate more resources to national defense. d) A nation participates in increased international trade with other nations of the world. e There is an advancement in firearms technology that only impacts the production of war goods 2. From the lecture, we know that the bow-outside PPF is more common in the real world. One of the reasons is the fact of heterogeneous workers; that is some workers may be good at producing this kind of goods while others may be good at producing other goods. This question serves as a good example for you to understand this. This is 2 points Bonus question! The following table shows the Production Possibilities Frontiers of country A and B Steel Television Steel Television 10 15 30 10 a) Calculate the opportunity cost of producing Steel and Television for Country A and B. Identify comparative advantage and specialization after trade opens up using the above information b) Now, assume these two countries become one united economy (e.g. European Union), try to DashboardCalendarE To DoNotificationsinbox

8:39 AM Fri Jan 25 95% KHomework1 Homework 1.pdf This is 2 points Bonus question! The following table shows the Production Possibilities Frontiers of country A and B Steel Television Steel Television 15 10 a) Calculate the opportunity cost of producing Steel and Television for Country A and B. Identify comparative advantage and specialization after trade opens up using the above information b) Now, assume these two countries become one united economy (e.g. European Union), try to identify the PPF of the new country by completing the table below Production Possibilities Frontier of new Country (A B) Steel Combination Television 15 10 c) Describe and explain the shape of the new PPF ー Dashboard CalendarTo Do Notifications Inbox

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