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Tutorial 1
Week2: Tutorial Questions
Chapter 1: Thinking Like an Economist
Chapter 2: Comparative Advantage
Chapter 1: Problem 2, 6, 8
Chapter 2: Problem 1, 5, 6
Chapter 1
Problem 2
To earn extra money in the summer, you grow tomatoes and sell them at a local farmers market for 30 cents
per pound. By adding compost to your garden, you can increase your yield as shown in the table on the next
page. If compost costs 50 cents per pound and your goal is to make as much profit as possible, how many
pounds of compost should you add?

Problem 6.
Martha and Sarah have the same preferences and incomes. Just as Martha arrived at the theater to see a
play, she discovered that she had lost the $10 ticket she had purchased earlier. Sarah also just arrived at
the theater planning to buy a ticket to see the same play when she discovered that she had lost a $10 bill
from her wallet. If both Martha and Sarah are rational and both still have enough money to pay for a ticket,
is one of them more likely than the other to go ahead and see the play anyway?

Problem 8.
Once a week, Smith purchases a six-pack of cola and puts it in his refrigerator for his two children. He
invariably discovers that all six cans are gone on the first day. Jones also purchases a six-pack of cola once
a week for his two children, but unlike Smith, he tells them that each may drink no more than three cans per
week. If the children use cost-benefit analysis each time they decide whether to drink a can of cola, explain
why the cola lasts much longer at Joness house than at Smiths.

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Chapter 2
Problem 1
Ted can wax a car in 20 minutes or wash a car in 60 minutes. Tom can wax a car in 15 minutes or wash a
car in 30 minutes. What is each mans opportunity cost of washing a car? Who has a comparative
advantage in washing cars?

Problem 5
Susan can pick 4 kg of coffee beans in an hour or gather 2 kg of nuts. Tom can pick 2 kg of coffee beans in
an hour or gather 4 kg of nuts. Each works 6 hours per day.
a. What is the maximum number of kilograms of coffee beans the two can pick in a day?
b. What is the maximum number of kilograms of nuts the two can gather in a day?

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c.

If Susan and Tom were picking the maximum number of kilograms of coffee beans when they decided
that they would like to begin gathering 4 kg of nuts per day, who would gather the nuts, and how
many kilograms of coffee beans would they still be able to pick?

d. Now suppose Susan and Tom were gathering the maximum number of kilograms of nuts when they
decided that they would like to begin picking 8 kg of coffee beans per day. Who would pick the coffee
beans, and how many kilograms of nuts would they still be able to gather?
e.

Would it be possible for Susan and Tom in total to gather 26 kg of nuts and pick 20 kg of coffee beans
each day? If so, how much of each good should each person pick?

f.

Is the point at 30 kg of coffee beans per day, 12 kg of nuts per day an attainable point? Is it an
efficient point?

g. Is the point at 24 kg of coffee beans per day, 24 kg of nuts per day an attainable point? Is it an
efficient point?
h. On a graph with kilograms of coffee beans per day on the vertical axis and kilograms of nuts per day
on the horizontal axis, show all the points you identified in parts ag.

Problem 6
Refer to the two-person economy described in Problem 5.
a. Suppose that Susan and Tom could buy or sell coffee beans and nuts in the world market at a price of $2
per kg for coffee beans and $2 per kg for nuts. If each person specialized completely in the good for which
he or she had a comparative advantage, how much could they earn by selling all their produce?
b. At the prices just described, what is the maximum amount of coffee beans Susan and Tom could buy in the
world market? What is the maximum amount of nuts? Would it be possible for them to consume 40 kg of
nuts and 8 kg of coffee beans each day?
In light of their ability to buy and sell in world markets at the stated prices, show on the same graph all
combinations of the two goods it would be possible for them to consume.