Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Computers...

     

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Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Computers Calculators Smith 10 units per hour 100 units per hour Jones 6 units per hour 120 units per hour A) What is Smith's and Jones' opportunity cost of an extra calculator? (2p) B) What is the maximum number of computers Smith and Jones can produce together in an hour if they coordinate their production decisions? (2p) C) Who has the absolute advantage in producing computers vs. calculators? (2p) D) Who has the relative advantage in producing computers vs. calculators? (2p) Question 4. Elasticity (6 points) You have opened an Irish pub in Jönköping. The demand schedule for beer is: P=68-1.5Q. a) Calculate the price elasticity of demand when price equals $25, use 2 decimals (2 points). b) If your goal is to maximize total revenue, how should you change price if you are currently charging $25? Explain with one short sentence. (2 point) c) A customer at the bar is choosing to buy either a Heineken or a Carlsberg (two brands of beer), what type of goods are these and what would the cross-price elasticity be for these two goods? (2 point) Question 5. Utility (10 p) Pernilla has specified 950 SEK as the monthly budget for consuming two goods (labelled A and B). The prices of the goods are PA = 50 and Pa = 200. How should she consume to maximize her utility, when U = QAQs+Q+Qa? What is her maximum utility? Question 6. Perfect competition (5 p) Assume that you own a firm working in perfect competition. What is the main goal of the firm? Illustrate graphically and explain how your firm chooses the optimal quantity to produce. Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Computers Calculators Smith 10 units per hour 100 units per hour Jones 6 units per hour 120 units per hour A) What is Smith's and Jones' opportunity cost of an extra calculator? (2p) B) What is the maximum number of computers Smith and Jones can produce together in an hour if they coordinate their production decisions? (2p) C) Who has the absolute advantage in producing computers vs. calculators? (2p) D) Who has the relative advantage in producing computers vs. calculators? (2p) Question 4. Elasticity (6 points) You have opened an Irish pub in Jönköping. The demand schedule for beer is: P=68-1.5Q. a) Calculate the price elasticity of demand when price equals $25, use 2 decimals (2 points). b) If your goal is to maximize total revenue, how should you change price if you are currently charging $25? Explain with one short sentence. (2 point) c) A customer at the bar is choosing to buy either a Heineken or a Carlsberg (two brands of beer), what type of goods are these and what would the cross-price elasticity be for these two goods? (2 point) Question 5. Utility (10 p) Pernilla has specified 950 SEK as the monthly budget for consuming two goods (labelled A and B). The prices of the goods are PA = 50 and Pa = 200. How should she consume to maximize her utility, when U = QAQs+Q+Qa? What is her maximum utility? Question 6. Perfect competition (5 p) Assume that you own a firm working in perfect competition. What is the main goal of the firm? Illustrate graphically and explain how your firm chooses the optimal quantity to produce.

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aThe opportunity cost of Smith of producing an extra calculator is 106167 computers while the opport... View the full answer