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# BEA111 Principles Of Economics For Opportunity Cost Per Tonne

• Course Code: BEA111
• University: University Of Tasmania
• Country: Australia

## Questions:

Question 1

Australian and Japanese workers can each produce four cars per year. An Australian worker can produce 10 tonnes of grain a year, whereas a Japanese worker can produce five tonnes of grain a year. Assume that each country has 100 million workers.

a) Which country has the absolute advantage in producing cars? Which country has the absolute advantage in producing grain? Explain your conclusions.
b) Which country has the comparative advantage in producing grain? Which country has the comparative advantage in producing cars? Explain.

Question 2

The following table describes the production possibilities for producing shirts for tourists by two businesses in Hobart:
Red shirts per worker per hour Blue shirts per worker per hour
Shirt Shack 2 1
Just Shirts 3 3

For example, the table reports that Shirt Shack can produce 2 red shirts in one hour, whereas Just Shirts can produce 3 red shirts in one hour.
a) Suppose that the two companies decide to specialize and trade with each other to increase their output. Which colour shirt should Shirt Shack produce? Which colour shirt should Just Shirts produce? You must provide support for your conclusions.
b) Identify the bounds on the terms at which they would agree to trade shirts? Express your answer in terms of the amount of red shirts that would be ‘paid’ for a blue shirt. Explain your answer.

Question 3

The market for wheat has the following demand and supply schedules:

Price (\$/tonne) Quantity Demand (100 tonnes) Quantity Supplied (100 tonnes)
4 135 26
5 104 53
6 81 81
7 68 98
8 53 110
9 39 121
10 0 133
a) What is the equilibrium price and quantity in this market?
b) Suppose a price floor was implemented in this market equal to \$8/tonne. Calculate the excess demand or excess supply created by the price floor.
c) Use a supply and demand diagram to illustrate how the price floor affects Total Surplus. Be sure to label all part of the diagram.

Question 4

Use a supply and demand analysis to predict what will happen to the equilibrium price and quantity of oranges if oranges are discovered to help prevent colds AND excellent weather has increased the number of oranges that can be harvested. You must provide clearly labelled supply and demand diagrams. You must also provide well-written economic arguments supporting your diagrams.

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