Question

(Most people agree that education is one of the crucial components that allow people to better themselves. A person misses out on many important opportunities if they are deprived of a complete education)

. Optimal decisions are made at the margin. Is this statement true? Explain this with the help of an example.

2.The table below indicates the number of desktops or laptops assembled per day with given technology and resources.

Combinations	Desktops	Laptops
A	1	7
B	2	5
C	4	4
D	5	3
E	7	0

i) Calculate the opportunity cost of moving from A to B. Explain why opportunity cost arise?

ii) Assume a new technology emerges which increases the output of laptops alone . How will it influence the production possibility frontier? You may show the change in the graph and explain your answer. Draw the production possibilities frontier for the given scenario

3.Assume England and Portugal produce both cloth and wine.

Output in units	England	Portugal
Cloth	100	90
Wine	120	80

i) Who has an absolute advantage for the production of wine? Who has the absolute advantage of producing clothes? Explain your answer.

ii) Who has a comparative advantage in Clothes? Which one has a comparative advantage in wine? Explain your answer.

4. Most Arab world economies work as mixed economies and not pure market economies. Do you agree to this? Explain your answer.

5. Explain the difference between a "change in quantity supplied" and a "change in supply."

6.A market research team has come up with the demand and supply schedules for sandwiches in a city. These schedules are given in the table below.

Price (dollars per sandwiches)	Quantity demanded (thousand per week)	Quantity supplied (thousand per week)
8	2	10
7	3	9
6	4	8
5	5	7
4	6	6
3	7	5
2	8	4

i) Draw a figure showing the demand curve and the supply curve of sandwiches. What are the equilibrium price and quantity? If the market price is $6, is it a surplus or shortage? How large is it?

Answer 1

(2)

(i) Opportunity cost (OC) arises because resources are limited, so producing more of one good means that production of some of the other good has to be given up.

OC between A and B in terms of desktops = Number of laptops given up = 7 - 5 = 2

OC between A and B in terms of laptops = Number of desktops given up = 2 - 1 = 1

(ii) PPF with original bundles is as follows, marked PPF0. When technology emerges that increases output of laptops, PPF0 shifts outward only along the axis depicting laptops (Horizontal axis) to PPF1.

NOTE: As per Chegg Answering Policy, 1st question is answered.