Changes

== '''Question 37 on the final exam''' ==

== '''Question 37 on the [[final exam]]''' ==

From a student:

From a student about the [[final exam]]:

I have thought through this question again and here is what I came up with. Mr. Schlafly successfully persuaded me to assume that the demand for rackets is equal to that for shoes. In fact, I believe that that assumed equality works against his answer rather than for it.

I have thought through this question again and here is what I came up with. Mr. Schlafly successfully persuaded me to assume that the demand for rackets is equal to that for shoes. In fact, I believe that that assumed equality works against his answer rather than for it.

: Ben, you make a good point and your citation to the Coase Theorem is superb.  You're right that, economically speaking, China should do all the production.  But, alas, that was not one of the answer choices!  It's doesn't fit your "can't tell" choice either.  Ha ha ha, the given answer is still the best answer!--[[User:Aschlafly|Aschlafly]] 22:58, 24 May 2007 (EDT)

: Ben, you make a good point and your citation to the Coase Theorem is superb.  You're right that, economically speaking, China should do all the production.  But, alas, that was not one of the answer choices!  It's doesn't fit your "can't tell" choice either.  Ha ha ha, the given answer is still the best answer!--[[User:Aschlafly|Aschlafly]] 22:58, 24 May 2007 (EDT)

I beg to disagree. You can reasonably assume that China will do all the procucing, but you '''''can't''''' tell the relative quantities of the two goods (which is what you asked for) unless you assume that China's marginal revenue for producing one more shoe equals their marginal cost at the same number that their MR = MC for rackets. If you do assume this then (a) will be the correct answer; not (b). The only way that (b) can be correct is if there is such a little demand for shoes that China's MR will be less than MC for the very first shoe. --[[User:BenjaminS|Ben]] _{[[User Talk:BenjaminS|Talk]]} 08:55, 25 May 2007 (EDT)

I beg to disagree. You can reasonably assume that China will do all the producing, but you '''''can't''''' tell the relative quantities of the two goods (which is what you asked for) unless you assume that China's marginal revenue for producing one more shoe equals their marginal cost at the same number that their MR = MC for rackets. If you do assume this then (a) will be the correct answer; not (b). The only way that (b) can be correct is if there is such a little demand for shoes that China's MR will be less than MC for the very first shoe. --[[User:BenjaminS|Ben]] _{[[User Talk:BenjaminS|Talk]]} 08:55, 25 May 2007 (EDT)

 

: I think the MR would factor in the comparative advantage in trading rackets for shoes, right?--[[User:Aschlafly|Aschlafly]] 10:29, 25 May 2007 (EDT)

== Final Exam ==

== Final Exam ==