QUESTIONS Question One Pick Group A2 and Group B1. For both groups prove that if
ID: 1134384 • Letter: Q
Question
QUESTIONS Question One Pick Group A2 and Group B1. For both groups prove that if the people in the group failed to trade with other groups that it would be impossible to achieve the consumption goals. Question Two Assume that Group A2 produces 150 units of wheat. (a) If Group A2 traded wheat for steel, how much steel would they have to receive in order for trade to not help or hurt them? Show your reasoning Assume that Group B2 produces 150 units of steel. (b) If Group 82 traded steel for wheat, how much wheat would they have to receive in order for trade to not help or hurt them? Show your reasoning Assume that Group 42 and Group B2 engage in trade. Group A2 offers to trade 150 units of wheat for 100 units of steel. (c) Will this trade benefit both groups? Explain. (d) If Group A2 and Group B2 trade the range of acceptable trades will be between 1 W for 3 Steel and 1 W for 1/3 Steel. Explain why this will be the range of acceptable trades. Question Three Explain why it makes sense that if Group A2 produces steel and tries to trade steel for wheat that it is impossible for Group A2 to find a trade that would benefit both parties. Question Four Explain why it makes sense that if Group B2 produces wheat and tries to trade wheat for steel that it is impossible for Group B2 to find a trade that would benefit both parties. Question Five Assume that we change the hours Group B2 needs to produce a unit of steel from 1 to 9. Explain why it makes sense that now if Group B2 tries to trade with Group A2 that it is impossible for the groups to find a trade that benefits both groups.Explanation / Answer
Q.1) A2 and B1 must trade with other groups or else they will not be able to achieve consumption goals.
considering Opprtunity costs: A2 should focus on wheat and B1 should focus on steel.(All figures are in units)
A2: Possible output: 150 wheat or 50 steel
B1: Possible output: 40 Wheat or 80 Steel
But consumption goals for A2 is 450 units of wheat which is more than A2 and B1 possible output and similaely consumption goal of B1 is 150 units of wheat and 200 units of steel.
Hence due to gap between consumption goals and possible output both B1 and A2 have to trade with other groups.
Question 2.)
a.If A2 Produces 150 units of wheat
and B2 produces 150 units of steel.
Currently Group A2 can produce 150 wheat or 50 steel, if they maintain same ratio then 20 steel and 60 wheat can be maintained.
b.Similarly, from Group B2 they currently can make 150 steel and 50 wheat.if they maintain same ratio and then 20 wheat and 60 steel can be maintained.
c. A2 and B2 offer to trade.
A2 offers to trade 150 units of wheat for 100 units of of steel
Then, A2 will have to employ all hours for the production of wheat and will not have any own steel and also no wheat, and in return when B2 gives 100 steel, B2 will only have approximately 17 original + 100 from A2 wheat and Hence this make both worseoff.
d) Country A2 and B2 accept 1 W For 3 steel and 1W for 1/3 steel then after trade
A2 will have: 90 Steel + 120 wheat and
B2 Will have: 30 Wheat+ 60 Steel
hence in the range 1W for 3 Steel and 1 W for 1/3 steel both countries are better off as they get more than current production.
d) If A2