1. A firm in NSW grows onions, and sells them at the Sydney market for $4 per
kilogram. By adding compost to the firm, owner of the firm can increase his yield
as shown in the following table. If compost costs $10 per bag and goal of the owner
is to make as much profit as possible, how many bags of compost should you add?
|Bags of Compost||Kilograms of Onions|
2. In a computer repairing shop, Tom can repair 10 computers per day or respond to
15 clients by phone per day. Jerry can repair 5 computers per day or respond to 20
clients by phone per day. Who has an absolute advantage in responding to clients?
What is Tom’s opportunity cost of repairing a computer? Who has a comparative
advantage in repairing computers? (2 marks)
|Jerry, 2, Tom||A|
|Jerry, 1, Jerry||B|
|Jerry, 1.5, Tom||C|
|Tom, 1.5, Jerry||D|
3. In the computer repairing shop example, assume that there is only Tom as a worker
in economy. He allocates his time between repairing computers and responding to
clients by phone. Each hour he devotes to repairing computer yields 5 computers,
and each hour she devotes to responding clients yields 10 responds. The number of
Tom’s working hours is 8 hours per day. Use simple algebra, what is the equation
of Tom’s production possibilities curve (PPC)? (2 marks)
Note: D denotes the number of computers repaired per day and B denotes the number of
responds to clients by phone per day.