ECO111 Microeconomics

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Student Information
Name: DAO THU CHINH Roll number: HA140250
Room No: Class: JPN1406

FOR TEACHER ONLY

MARK MARKED BY Signature of Proctor
(NAME AND SIGNATURE)

Individual Assignment 01
Question 1. (2 points)

1. What is your opportunity cost of each of the following?

a. Attending your next economics class meeting.
- Take time to relax
- No time to work
- Take a day out with friend
b. Skipping your next economics class meeting.
- Increase knowledge of economics, improve my future, foregone tuition fee.
c. Taking an all expenses paid trip to the Lasvegas for a week during this semester.
- Missed out time with family and friend, no time to work and study.
2. The local pizza restaurant is advertising a special. If you buy one individual sized pizza,
you get the next one at 25% off, the third one for 50% off and the fourth one for 75% off.
Your marginal benefit from eating pizza is shown in the table below. If the price of a pizza
is $6, how many should you buy? (3 points)

No of pizzas MB (Marginal Benefit)

0 0
1 7
2 4
3 2
4 1

- If the prince of a pizza in $6, the next one at 25% off will be:
$6 – ($6*25%) = $4.5 (marginal cost 4.5 > 4 marginal benefit)
- The third one for 50% off will have prince is:
$6 – ($6*50%) = $3 (marginal cost 3>2 marginal benefit)
- The fourth on for 75% off will have price is:
$6 – ($6 * 75%) = $1.5 (marginal cost 1,5>1 marginal benefit)
- Base on the table we can marginal benefit exceeds marginal cost for only the first pizza
(7>6). Therefore, if the price of a pizza is $6, I should buy only one.
3. The workers in a factory currently earn $120 for a 39 – hour week. The management
offers them a choice between either a straight 10% wage increase or an increase in the
weekly wage to $125 coupled with a reduction in hours from 39 to 37 hours. What is the
opportunity cost to each worker of opting for the 37 – hour week?
- Case 1: workers choose a straight 10% wage increase. Their new wage for a 39 –hour
week will be:$120 + ($120*10%) = $132 - Case 2: Workers choose an increase in the
weekly wage to $125 coupled with areduction in hours from 39 to 37 hours. Therefore
$132 for a 39-hour week is the opportunity cost to each worker ofopting forthe 37 – hour
week. Case 1 will earn more money than case 22/2

Question 2. (3 points)

1. a. What is defined as absolute advantage?

b. What is defined as comparative advantage?
c. Case 1: Output approach
Two commodities and two countries
Given the resources, Singapore and Malaysia can produce the following products –
television sets and cars (see Table 01)
Countries TV sets Cars (units)
Singapore 100 50
Malaysia 60 40
Table 01
+ Which country has the absolute advantage in the production of both TV sets and
Cars over the other?
- Singapore has the absolute advantage in the production of both TV sets and
Cars. Because Singapore can produce more both TV sets and cars than
Malaysia, with 100 TV sets and 50 cars compared to 60 TV sets and 40 cars of
Malaysia
+ Which country has the comparative advantage either in the production of TV sets
or in the production of Cars over the other? Draw your PPF to illustrate
TV SETS

100

80

60

40

20

Cars
0 10 20 30 40 50

Singapore
TV SETS
100

80

60

40

20

Cars
0 10 20 30 40 50

Malaysia

- Singapore has a comparative advantage in TV sets because:

+ The opportunity cost of 1 TV sets in Singapore is 0.5 cars.
+ The opportunity cost of 1 TV sets in Malaysia is 0.67 cars.
- Malaysia has a comparative advantage in car because:
+ The opportunity cost of 1 cars in Singapore is 2 TV sets.
+ The opportunity cost of 1 cars in Malaysia is 1.5 TV sets.

d. Case 2: Input approach

Two commodities and two countries
Give the resources, America and England can produce one unit for both Steel and
Coal in terms of number of working hours shown as follows:
Countries One unit of Steel One unit of Coal
required required
America 80 man-hours 90 man-hours
England 120 man-hours 100 man-hours
Table 02
+ Which country should specialize in the production of Steel? Explain
- The opportunity cost of 1 unit of steel:
In America: 80:90 = 8/9 unit of coal
In England: 120:100 = 1.2 unit of coal
 America should specialize in the production of Steel
+ Which country should specialize in the production of Coal? Explain
- The opportunity cost of 1 unit of coal:
In America: 90:80 = 9/8 unit of steel
In England: 100:120 = 5/6 unit of steel
-> England should specialize in the production of coal
e. Case 3: Input approach
Two countries but multiple commodities
The following Table 03 shows the numbers of man – days taken to produce an
equivalent amount of six commodities in each of the two countries – Switzerland
and Sweden.
Countries Coal Cotton Wool Iron Wheat Maize
Switzerland 120 60 70 100 140 80
Sweden 100 25 35 90 90 20
Table 03
+ Assuming that there are no other costs of production. Which two commodities is
Sweden most likely to import from Switzerland? Explain
 - if do not mention the cost of the production, I see that Sweden is
need much the numbers of man – days to produce, most about Coal,
Iron and Wheat. Sweden will need to import Coal & Iron from
Switzerland
- Coal cost most of opportunity cost for Sweden to produce, so this
product will be the most prioriti for this country.
- Iron in Switzerland has less opportunity cost than Wheat so
Switzerland produce more Iron. That is the chance for Sweden to
import the product cost more opportunity cost.
Question 3. Write an Essay with 800 words as follows;

+ What are the benefits/gains from international trade? Write an essay with 400 words
and provide your answers with real example in the context of Vietnam international trade
relations
1. The accessibility and affordability of goods
Consumers can get foreign items at lesser costs thanks to
international trade. Foreign goods are typically imported due to their
greater affordability than native goods prices.
2. Development of the industrial age
A new industrial civilization has been produced due to global
trade, specialization in large-scale production, the use of machinery,
and the exploitation of natural resources.
3. Internal price stabilisation
With the aid of international trade, a nation's surpluses might be
exported to another country, and imports could make up a nation's
deficits. In the end, this will cause the internal price level to
stabilize.
4. High production costs
The countries can purchase goods through international trade that
they cannot create locally due to a lack of necessary inputs,
demand, or excessive production costs. Only through international
trade were tea and penicillin made available to Europe and Africa.
5. Transportation improvements
The advancement of global trade has improved the world's
transportation infrastructure.
6. Sovereign solution for starvation and war
International trade allows a nation's citizens to survive during
times of famine, scarcity, and conflict by importing goods from
other countries, like food, clothing, and medicine.
7. Advancement of developing countries
International trade enables economically underdeveloped and
backward nations to import capital goods and machinery in return
for their raw materials, agricultural output, and food supplies.
8. Lessens monopolistic abuse
Because of the spirit of competition, domestic companies can
maintain high standards for their production practices. There is little
concern about monopolies, and competition forces companies to
keep lower pricing.
9. Payment transfer
Thanks to international trade, payments can be transferred from a
debtor country to a creditor country. The debtor country exports
goods to pay off its debts to the creditor countries.
10. The state of the nation
International trade is indeed a matter of life and death for many
countries. For instance, the UK and Japan cannot feed, clothe, or
house their current populations without imports from other nations.
The export of these nations' manufactured goods is essential to their
continued existence. Compared to importing, the costs of self-
sufficiency will be very expensive. Without international trade,
Americans' daily cups of coffee would become a luxury.

+ What are the disadvantages of international trade? Write an essay with 400 words
and provide your answers with real example in the context of Vietnam international trade
relations
Disadvantages of international trade span from negative social effects to adverse
environmental ramifications. Sometimes the welfare of people is ignored or jeopardized
for the sake of profit. Other problems associated with the exchange of goods and services
between nations include possible risky dependence on foreign nations and domestic job
losses.
There are social disadvantages of international trade. Although
exposure to other cultures can be a benefit, it can also be harmful.
The types of goods and services that flow from developed nations to
emerging nations can have rapid and significant negative effects on
their cultures. For example, certain music or movies from a nation
such as the United States cannot be sold in their original form, and
sometimes not at all, in some other nations where culture or religion
are prioritized because of the changes in mentality and behavior that
they may incite.
Another of the disadvantages of international trade is that the
welfare of the people in nations that produce goods and services is
sometimes ignored for the sake of profits. Those profits generally
benefit only a minority, and that minority may not even be citizens
of the nation that they are exploiting. It is common in third world
countries to find that people are required to work under unfair
circumstances, which may include being paid low wages or
subjected to unhealthy occupational environments.
International trade can also result in destruction and exhaustion of
natural resources. Some countries are so desperate for revenue or so
profit-driven that they will allow their natural resources to be over-
exploited, which can create serious problems in the future. This is
often exacerbated by the fact that the entities who are engaged in the
task of extracting those resources or producing goods from them
may do so in a way that creates substantial environmental damage.
In some cases, there are limited or no resources to address these
issues afterward.