donuts

Abdullah loves donuts. The table below reflects the value Abdullah places on each donut he eats:

 Value of first donut

$0.60

Value of second donut

$0.50

Value of third donut

$0.40

Value of fourth donut

$0.30

Value of fifth donut

$0.20

Value of sixth donut

$0.10

a.       Use this information to construct Abdullah’s demand curve for donuts.

b.       If the price of donuts is $0.20, how many donuts will Abdullah buy?

c.       Show Abdullah’s consumer surplus on your graph. How much consumer surplus would he has at a price of $0.20?

d.       If the price of donuts rose to $0.40, how many donuts would he purchase now? What would happen to Abdullah’s consumer surplus? Show this change on your graph.

 Question Two:

Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.

 Hours Needed

to Make 1

Quantity Produced

in 2400 Hours

           Car

   Airplane

       Cars

 Airplanes

Japan

30

150

80

16

Korea

50

150

48

16

1-      What is Japan’s opportunity cost of one car?

2-      Suppose Korea decides to increase its production of cars by 18. What is the opportunity cost of this decision?

3-       3- In what product Japan has an absolute advantage? and in what product Korea has an absolute advantage ?

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