Question

In this Assessment, you will apply your understanding of comparative advantage as a foundation for trade, along with your understanding of the crucial concept of changes in supply and demand equilibrium. You will also provide a rational approach on how cultural differences and the downfalls of stereotyping people from foreign cultures and misunderstanding their cultural attitudes affect international trade. This Assessment requires you to use the Microsoft® Word® template provided to compose a combination of short paragraph answers, computations, and completion of a 450–500-word expository research paper.

Questions

1. Suppose that the supply schedule of Brazilian coffee beans is as follows:

Table 1

Price of Brazilian coffee beans (per pound)	S Quantity of Brazilian coffee beans supplied (pounds)
$4.00	6,000
$3.50	5,000
$3.00	4,000
$2.50	3,000
$2.00	2,000

Suppose that Brazilian coffee beans can be sold only in Brazil. The domestic Brazilian demand schedule for Brazilian coffee beans is as follows
Table 2

Price of Brazilian coffee beans (per pound)	DB Brazilian quantity of Brazilian coffee beans demanded (pounds)
$4.00	1,000
$3.50	2,500
$3.00	4,000
$2.50	5,000
$2.00	7,000

1. From the supply and demand schedules above, what are the equilibrium price and quantity of Brazilian coffee beans

Now suppose that Brazilian coffee beans can also be sold in Canada. The Canadian demand schedule for Brazilian coffee beans is shown in Table 3.

Table 3

Price of Brazilian coffee beans (per pound)	DC Canadian quantity of Brazilian coffee beans demanded (pounds)
$4.00	1,000
$3.50	2,500
$3.00	3,000
$2.50	5,000
$2.00	5,500

2. Complete column D_C+D_B total combined Canadian and Brazilian coffee beans demanded of Table 4, by inserting the correct values, computed from information contained in Tables 2 and 3, at each price.
   
   Table 4

Price of Brazilian coffee beans	S Quantity of Brazilian coffee beans supplied	DB Brazilian quantity of Brazilian coffee beans demanded	DC+DB Total combined Canadian and Brazilian coffee beans demanded
(per pound)	(pounds)	(pounds)	(pounds)
$4.00	6,000	1,000
$3.50	5,000	2,500
$3.00	4,000	4,000
$2.50	3,000	5,000
$2.00	2,000	7,000

Below is the new supply and demand graph (Graph 2.b.) that illustrates the equilibrium price and quantity of Brazilian coffee beans.

3. From the completed Table 4, what will be the new price at which Brazilian coffee growers will sell Brazilian coffee beans?
4. From the completed Table 4, what price will now be paid by Brazilian consumers?
5. From the completed Table 4, what will be the quantity consumed by Brazilian consumers?

2. In ancient days, a tribe of natives on the mythical continent of Atlantis were able to produce two commodities to eat. They could harvest fish from the sea and they could grow a form of wild oats. Table 5 and Graph 1.a. both show the maximum annual output combinations of fish and wild oats that could be produced by the natives of Atlantis.
Table 5

Maximum annual output options	Kilograms of fish	Bushels of wild oats
1	7,000	0
2	6,000	300
3	5,000	500
4	4,000	625
5	3,000	710
6	2,000	775
7	1,000	825
8	0	850

Graph 1.a.

1. Could the Atlantis tribe have produced 800 bushels of wild oats and 5,000 kilograms of fish at the same time? Explain your answer. Where would this point lie relative to the production possibility frontier?
2. Using Table 5, what would have been the marginal opportunity cost of increasing the annual output of wild oats by 200 bushels, from 300 bushels up to 500 bushels?
3. Using Table 5, what would have been the marginal opportunity cost of increasing the annual output of wild oats by 200 bushels, from 625 bushels up to 825 bushels?
4. Why are the marginal opportunity costs for two similar batches of 200 bushels of wild oats not the same? Explain. What does this difference imply about the shape of the Atlantis tribe’s production possibility frontier curve?

Answer 1

1.

Price of Brazilian coffee beans (per pound)	S Quantity of Brazilian coffee beans supplied (pounds)	DB Brazilian quantity of Brazilian coffee beans demanded (pounds)
$4.00	6,000	1000
$3.50	5,000	2500
$3.00	4,000	4000
$2.50	3,000	5000
$2.00	2,000	7000

a.  The equilibrium price and quantity of Brazilian coffee beans are where demand is equals to supply.

At Price= $3, the quantity demand= 4000 and quantity supplied= 4000. So

Equilibrium price = $3

Equilibrium quantity= 4000

a. Table number 4:

Price of Brazilian coffee beans (per pound)	S Quantity of Brazilian coffee beans supplied (pounds)	DB Brazilian quantity of Brazilian coffee beans demanded (pounds)	DC Canadian quantity of Brazilian coffee beans demanded (pounds)	DB+DC
$4.00	6,000	1000	1000	2000
$3.50	5,000	2500	2500	5000
$3.00	4,000	4000	3000	7000
$2.50	3,000	5000	5000	10000
$2.00	2,000	7000	5500	12500

a.

The new price at which Brazilian coffee growers will sell Brazilian coffee beans:

New Price = $3.5

b.

Price paid by the Brazilian consumers= $3.5

c.

The quantity consumed by Brazilian consumers= 2500 pounds