Please Answer 2,4, and 5. Three Full pages are not required. Please answer the questions accordingly. 2. Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish. Max. Annual Output —– Qty. of Potatoes —— Qty. of Fish A _________________ 1,000 ________________ 0 _____________ B _________________ 800 ________________ 300 _____________ C _________________ 600 ________________ 500 _____________ D __________________ 400 ________________ 600 _____________ E __________________ 200 _________________ 650 ______________ F __________________ 0 __________________ 675 ______________ B. Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes? Please Explain why or why not. Where would this point lie relative to the production possibility frontier? C. What is the opportunity cost of increasing the annual output of potatoes from 600 to 800 pounds? D. What is the opportunity cost of increasing the annual output of potatoes from 200 to 400 pounds? E. Can you explain why the answers to parts C&D are not the same? What does this imply about the slope of the production possibility frontier? 4. In the ancient country of Roma, only two goods, spaghetti and meatballs, are produced. There are two tribes in Roma, the Tivoli and the Frivoli. By themselves, the Tivoli each month can produce either 30 pounds of spaghetti and no meatballs, or 50 pounds of meatballs and no spaghetti, or any combination in between. The Frivoli by themselves, each month can produce 40 pounds of spaghetti and no meatballs, or 30 pounds of meatballs and no spaghetti, or any combination in between. a. Assume that all production possibility frontiers are straight lines. Draw one diagram showing the monthly production possibility frontier for the Tivoli and another showing the monthly production possibility frontier for the Frivoli. Show how you calculated them. b. Which tribe has the comparative advantage in spa-ghetti production? In meatball production? In A.D. 100 the Frivoli discover a new technique for making meatballs that doubles the quantity of meat-balls they can produce each month. c. Draw the new monthly production possibility frontier for the Frivoli. d. After the innovation, which tribe now has an absolute advantage in producing meatballs? In producing spaghetti? Which has the comparative advantage in meatball production? In spaghetti production? 5. According to the U.S. Census Bureau, in July 2006 the United States sold aircraft worth $1 billion to China and bought aircraft worth only $19,000 from China. During the same month, however, the United States bought $83 million worth of men’s trousers, slacks, and jeans from China but sold only $8,000 worth of trousers, slacks, and jeans to China. Using what you have learned about how trade is determined by comparative advantage, answer the following questions. a. Which country has the comparative advantage in aircraft production? In production of trousers, slacks, and jeans? b. Can you determine which country has the absolute advantage in aircraft production? In production of trousers, slacks, and jeans?
