ANSWERS, SOLUTIONS, AND EXERCISES
PROBLEM SET
1. As society moves from point F to point H to point J and so forth, the opportunity cost
of 200,000 additional bushels of wheat rises. Looking at the horizontal axis we see
Tanks per year
Bushes of wheat
per year
2. A technological innovation in life-saving would rotate the PPF out along the
3. A technological innovation in the production of other goods would rotate the PPF out
6
7 Instructor’s Manual for Economics: Principles and Applications, 6e
4 .
5. a.
Labor Requirements for Berries and Fish
1 Cup of Berries 1 Fish
b. Maryanne has a competitive advantage in picking berries, since her opportunity
cost of picking berries is lower than Gilligan’s. Her opportunity cost of picking 1
cup of berries is 1 of a fish, while his opportunity cost of picking 1 cup of berries
c. Both castaways can benefit from Gilligan’s new abilities if they specialize in
producing the good in which they have the comparative advantage. If Maryanne
catches two less fish, she can use the two hours saved to produce two more cups of
Change in Berry
Produc!on
Change in Fish
Produc!on
Chapter 2 Scarcity, Choice, and Economic Systems 8
6. a.
Labor Requirements for Pineapples and Coconuts
1 Pineapple 1 Coconut
b. Mrs. Howell has a competitive advantage in picking pineapples, since her
opportunity cost of picking pineapples is lower than Mr. Howell’s. Her opportunity
cost of picking 1 pineapple is ¼ coconut, while his opportunity cost of picking 1
c. Before finding each other, Mr. and Mrs. Howell’s total production would be:
Pineapples Coconuts
After specializing, their total production would be:
Pineapples Coconuts
7. a. You have an absolute advantage in outlining since you can produce four more
9 Instructor’s Manual for Economics: Principles and Applications, 6e
b. If you spend a full day doing research, you can produce 6 outlines, but must give
up 20 pages of typing; the opportunity cost of each outline is 20/6 = 3 1/3 typed
pages. On the other hand, your friend could produce 2 outlines, and would have to
give up 10 typed pages; for him, the opportunity cost of each outline is 10/2 = 5
c. According to the principle of comparative advantage, you should specialize in
8. If the PPF is a downward-sloping straight line, then the law of increasing opportunity
cost does not hold. Instead, the opportunity cost of producing an additional unit of
Good 1
Good 2
MORE CHALLENGING
9. a. Because each bushel of soybean is exchanged for 3 T-shirts, and the U.S. exports
b. After trade with China, Americans will have 10 more bushels of soybean, and 70
Soybeans
(Bushels)
T-Shirts
Chapter 2 Scarcity, Choice, and Economic Systems 10
c. After trade with the U.S., the Chinese will have 10 more bushels of soybean, and
130 more T-shits to consume.
Soybeans
(Bushels)
T-Shirts
d. This statement is false. We can see that trade benefits both the U.S. and China as
10. The statement is false. Just because one method is cheaper per life-year saved does not
mean that fully implementing that method is cheaper in total. The cost per life-year
saved is a fraction: total cost in the numerator divided by life-years saved in the
EXPERIENTIAL EXERCISES
The ability to measure the true cost of a choice is a skill that will pay you great dividends.
Using a recent issue of the Wall Street Journal, try to find an article that discusses a decision