微观经济学全英版作业

Homework One

1. Suppose that in a year an American worker can produce 100 shirts or 20 computers, while a Chinese worker can produce 100 shirts or 10 computers.

a. Graph the production possibilities curve for the two countries. Suppose that without trade the workers in each country spend half their time producing each good. Identify this point in your graph.

b. If these countries were open to trade, which country would export shirts? Which country would benefit from trade? Explain.

c. Explain at what price of computers (in terms of shirts) the two countries might trade.

d. Suppose that China catches up with American productivity so that a Chinese worker can produce 100 shirts or 20 computers. What pattern of trade would you predict now? How does this advance in Chinese productivity affect the economic well-being of the citizens of the two countries?

2. The United States exports corn and aircraft to the rest of the world, and it imports oil and clothing from the rest of the world. Do you think this pattern of trade is consistent with the principle of comparative advantage? Why or why not?

3. Consider the market for minivans. For each of the events listed here, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. Then draw a diagram to show the effect on the price and quantity of minivans.

a. People decide to have more children.

b. A strike by steelworkers raises steel prices.

c. Engineers develop new automated machinery for the production of minivans.

d. The price of sports utility vehicles rises.

e. A stock-market crash lowers people’s wealth.

4. Because bagels and cream cheese are often eaten together, they are complements. Flour is an ingredient in bagels and milk is an ingredient in cream cheese.

a. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern—a fall in the price of flour or a fall in the price of milk? Illustrate using Figures and explain your answer.

b. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern—a rise in the price of flour or a rise in the price of milk? Illustrate using Figures and explain your answer.