I really need help. I need to answer this 3 questions
My first is this:
Pizzas CD's
------ ------
0 15
1 14
2 12
3 9
4 5
5 0
Using this information, calculate the marginal benefit and draw the marginal benefit curve.
****I really need to know how to calculate it.
My second question is: which is totally unrelated.
2.How did the catastrophic events of 9-11 affect the marginal benefit and marginal cost diagram? (Hint: One of the curves shifted). Draw a diagram showing the post-9-11 marginal benefit and marginal cost diagram. What is the new efficient quantity of security services? How does this new point relate to the discussion in the Wall Street Journal article about the costs being imposed on the public from enhanced security?
***I know i asked this second one already but this time i just need a bit clarification.
****Why would the Marginal benefit shift to the right and how do we know how much it shifts by to determine the new efficient quantity???
Now my final question is this:
3.Suppose a new technology becomes available that cheaply and easily detects “intent to harm” by remote sensing of physiological indicators. Unobtrusive (and inexpensive) detectors would immediately alert authorities to the presence of terrorists. With the same amount of land, labour and capital as before, this technology would enable us to provide more “units of security”. What would be the effect of this new technology in the diagram with the production possibilities frontier and in the diagram with the marginal benefit and marginal cost curves? What happens to the efficient quantity of security?
**** If that happens then would x-axis of the PPF shift outward and in relation to the marginal benefit and cost, the marginal cost curve will shift to the right because the cost is decreasing.
This is the PPF for questions 2 and 3
*img170.imageshack.us/img170/7894/ppfiq2.jpg
You asked a similar question earlier, and I stand by that answer.
A production possibilities curve says nothing about the marginal benefits of two goods in question. You need additional information. Specifically you need some information on the marginal rate of substitution in consumption. This should be some sort of isoquant utility curve. However, you could use the relative market prices. In your question 1, do you know the dollar prices of pizzas and CDs?
Alternatively, do you have the price of pizza in terms of CDs? With prices you have a marginal rate of substitution in consumption.
To illustrate, say the price of pizza is $5 and the price of CDs is $10. Thus 2 pizzas = 1 CD. Or the marginal rate of substitution is 10/5=2 (and is constant (therefore flat)).
2) in your original 2-good model you had Security and Everything Else as your two goods. 9-11 caused an increase in the demand for security. The PPF says that in order to get more security, you need to give up some of Everything Else. 9-11 caused a change in preferences such that people were willing to give up MORE of Everything Else to get one additional unit of Security -- regardless of the existing level of Everything Else. So, to answer your question, 9-11 increased the demand for Security vis-a-vis Everything Else. This is illustrated by a right shift in the marginal benefit for Security. However, we cannot say by how much unless you can provided additional data on the original and new marginal rates of substitution for Security/Everything Else.
3) The new technology lowers the cost of Security vis-a-vis Everything else. In your PPF, the curve pivots out. The maximum amount of Everything else remains constant. However the maximum amount of Security increases. In the end, you will definitely end up with more Security, and probably more of Everything else. However the latter is not certain as you did not provide information on the marginal benefits Security.
For the first question about calculating the marginal benefit, you need to understand the concept of the marginal benefit first. Marginal benefit is the additional benefit or satisfaction that a person receives from consuming one more unit of a good or service. In this case, the goods are pizzas and CDs.
To calculate the marginal benefit, you need to look at how the benefit changes as you consume more units of the good. In the given information, you have the quantities of pizzas and CDs and you can think of them as different consumption levels. The marginal benefit is the difference in benefit between each level.
For example, let's calculate the marginal benefit of consuming 1 pizza compared to 0 pizzas. From the given information, the benefit (or value) of having 0 pizzas is 15 CDs, and the benefit of having 1 pizza is 14 CDs. So, the marginal benefit of consuming 1 pizza is 14 - 15 = -1 CDs.
Similarly, you can calculate the marginal benefit for each level of consumption and create a table like this:
Pizzas | CDs | Marginal Benefit
0 | 15 | N/A (no previous level to compare)
1 | 14 | -1
2 | 12 | -2
3 | 9 | -3
4 | 5 | -4
5 | 0 | -5
To draw the marginal benefit curve, you can plot the quantity of pizzas on the x-axis and the marginal benefit on the y-axis. Connect the points on the graph to form a curve. In this case, the marginal benefit curve would be downward sloping, indicating that as you consume more pizzas, the marginal benefit decreases.
Moving on to the second question, the catastrophic events of 9-11 affected the marginal benefit and marginal cost diagram by causing a shift in the marginal benefit curve for security services. The marginal benefit curve shifted to the right, indicating an increase in the willingness to pay for security services.
The exact amount of the shift and the new efficient quantity of security services cannot be determined without additional information. However, the shift of the marginal benefit curve to the right implies that people are willing to pay more for security services after the events of 9-11.
Regarding the third question, with the introduction of the new technology for remote sensing of physiological indicators, the production possibilities frontier (PPF) curve would shift outward. This indicates an increase in the potential to produce more units of security using the same resources (land, labor, and capital) as before.
In relation to the marginal benefit and cost curves, the marginal cost curve would shift to the right. This is because the cost of producing each additional unit of security decreases with the new technology, leading to a lower marginal cost.
The new efficient quantity of security would depend on the relative marginal benefit and marginal cost. If the marginal benefit of security is higher than the marginal cost with the new technology, the efficient quantity of security would increase.
In summary, calculating the marginal benefit involves comparing the benefit at different consumption levels. The catastrophic events of 9-11 caused a shift in the marginal benefit curve for security services. The new technology would result in an outward shift of the PPF curve and a rightward shift of the marginal cost curve, potentially leading to an increase in the efficient quantity of security.