Week 2 Problem Set

1) Chapter 2 "Problems and Applications" number 2.7 (Related to Solved Problem 2.2 around page 52)

Suppose that France and Germany both produce schnitzel and wine. The following table shows combinations of the goods that each country can produce in a day:

a. Which country has a comparative advantage in producing wine? Which country has a comparative advantage in producing schnitzel?

France	Germany
Wine (bottles)	Schnitzel (pounds)	Wine (bottles)	Schnitzel (pounds)
0	8	0	15
1	6	1	12
2	4	2	9
3	2	3	6
4	0	4	3
		5	0

b. Suppose that France is currently producing 1 bottle of wine and 6 pounds of schnitzel, and Germany is currently producing 3 bottles of wince and 6 pounds of schnitzel. Demonstrate that France and Germany can both be better off if they specialize in producing only one good and then trade for the other.

2) Chapter 3 (Related to Problems and Applications 3.1.10 p.101 and 3.2.7 p.103.)

Suppose that the following table shows the quantity demanded and the quantity supplied of UGG boots at five different prices in 2019.

Price	Quantity Demanded in 2019 (thousands of pairs of boots)	Quantity Supplied in 2019 (thousands of pairs of boots)
$ 160	4,000	2,000
170	3,500	2,500
180	3,000	3,000
190	2,500	3,500
200	2,000	4,500

a. What is the equilibrium price in this market?

b. What is the equilibrium quantity?

c. At which of the price(s) in the table would there be a surplus of boots?

d. At which of the price(s) in the table would there be a shortage of boots?

3) Chapter 3 "Problems and Applications" 4.15

The following four graphs represent four market scenarios, each of which would cause either a movement along the supply curve for premium bottled water or a shift of the supply curve. Match each scenario with the appropriate graph.

\fPrice Quantity