AB 204 Unit 3 Assignment

AB 204-02

Unit 3 Assignment

Kaplan University

March 21, 2017

Unit 3Template

Price Quantity DemandedPer Month Quantity SuppliedPer Month
$5 6,000 10,000
$4 8,000 8,000
$3 10,000 6,000
$2 12,000 4,000
$1 14,000 2,000

2) Consider supply and demand for Maine lobsters indicated in the following tables to answers questions from a โ€“d below. Suppose that the supply schedule of Maine lobsters is as follows:

Price of Lobster per Pound Maine Quantity of Lobster Supplied (pounds)
$25 800
$20 700
$15 600
$10 500
$5 400

First, assume that Maine lobsters can be sold only in the United States. The U.S. demand schedule for Maine lobsters is as follows:

Price of Lobster per Pound USA Quantity of Lobster Demanded (pounds)
$25 200
$20 400
$15 600
$10 800
$5 1,000
Price of Lobster per Pound Quantity of Lobster Demanded (pounds)
$25 100
$20 300
$15 500
$10 700
$5 900

What is the demand schedule for Maine lobsters now that French consumers can also buy them?

  • Looking at both the schedules of supply and demand, as well as the graph of the demand and supply curve for Maine Lobsters, what is the equilibrium price of lobsters and the equilibrium quantity of lobsters demanded and supplied at that price?
  • The equilibrium price and quantity is based on where supply and demand equal each other or where they curve intersect.The equilibrium quantity will be 600 lobsters and the equilibrium price will be $15.
  • Second, suppose that Maine lobsters can also be sold in France. The French demand schedule for Maine lobsters is as follows:

The equilibrium of the French cost per pound would be $20 per pound and the pounds of lobster would be 700.

c. Using the combined U.S. and French demand schedule, the U.S. demand schedule and the supply schedule, and the graph below, analyze the change in the market for lobsters. What will happen to the price at which fishermen can sell lobster? What will be the final output of lobsters?

It would be a good for them to sell to the fishermen. If they would sell more lobster at a higher price the United States would be worse off. They must pay a higher price for lobster and, as a result, consume less lobster. ($20 versus $15 per pounds,400 versus 600 pounds)

Due to international trade Producer surplus of an exporting country will increase, the fisherman who is ready to supply 400 pounds at $5, is now charging $20 equilibrium price.

Final output of lobsters is 700lbs, out of which 400 is sold domestically and 300 is exported to France.

For both b and C

Now that the French consumers can also buy them, the supply and demand schedule of the US shows the equilibrium price and quantity of the US is $15 and 600 lbs. When they export to the French, that demand is added to the US demand in order to get the total market demand. With the price at $20 and the quantity is 700 Units, making it 400 the US consumption and 300 the French consumption. The graph below represents how this is all figured out.

d. What will happen to the price paid by U.S. consumers? What will happen to the quantity consumed by U.S. consumers?

The consumer surplus will be decreased and the US will have to pay a higher equilibrium price. The availability of the quantity is 400lbs based on the demand, so they must pay a higher price of $20. Allowing the US consumer to only consume 400lbs of lobsters.

3) Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

  Quantity of Potatoes (Pounds) Quantity of Fish (Pounds)
A 1,000 0
B 800 300
C 600 500
D 400 600
E 200 650
F 0 675

Examine the Maximum annual output options table above and the resulting Production Possibility Frontier Graph below and answer questions from a -e.

a. Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes? Explain.

Since the point lies outside the production frontier, it is not possible to produce 500lbs of fish and 800lbs of potatoes because the output level lies towards the right and above the PPV curve.

b. What is the opportunity cost of increasing the annual output of potatoes from 600 to 800 pounds?

The opportunity cost of increasing the annual output of potatoes from 600 to 800lbs, the country would have to lose 200lbs of fish. Figuring this out by subtracting 500lbs of fish from 300lbs of fish. Therefore, the opportunity cost is 200lbs of Fish.

c. What is the opportunity cost of increasing the annual output of potatoes from 200 to 400 pounds?

When Output increases from 200 to 400 units that is, there is an increase in 200lbs of potatoes, for this the country must sacrifice 50 units of fish (650 -600)

So, at point D, 200 pounds of Potato = 50 Pounds of Fish is the opportunity cost.

d. Can you explain why the answers to parts b and c are not the same?

The reason why the answers to parts c and d are not the same is because as more of one product is produced, increasingly large amounts of the other product must be given up.

e. What does this imply about the slope of the production possibility frontier?

This implies that the shape of the slope of production possibility frontier illustrates the principles of increasing opportunity cost. The variation in the slope says the PPV curve is bowed out. When goods are produced in an economy, some of the resources will be more efficient at producing one item more than the other.


Mankiw, N. G. (2015). Principles of Macroeconomics, 7th Edition. [Kaplan]. Retrieved from https://kaplan.vitalsource.com/#/books/9781305156067/https://kaplan.vitalsource.com/#/books/9781305156067/

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