1.) both have ten hours of time available. The can use their time to do one of two things: make pancakes or make hamburgers. Bob can make ten hamburgers in an hour or two pancakes in an hour. Jake can make five pancakes in an hour or one hamburger in an hour. Consider a simple exchange economy with two people: Bob and Jake. Bob and Jake a.) Draw Bob and Jake's PPFS with hamburgers on the x-axis. Give equations for both PPFS in y=mx+b form. b.) Who has comparative advantage in the production of hamburgers? Who has comparative advantage in the production of pancakes?

1.) both have ten hours of time available. The can use their time to do one of two things: make pancakes or make hamburgers. Bob can make ten hamburgers in an hour or two pancakes in an hour. Jake can make five pancakes in an hour or one hamburger in an hour. Consider a simple exchange economy with two people: Bob and Jake. Bob and Jake a.) Draw Bob and Jake's PPFS with hamburgers on the x-axis. Give equations for both PPFS in y=mx+b form. b.) Who has comparative advantage in the production of hamburgers? Who has comparative advantage in the production of pancakes?

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Description: 1.)both have ten hours of time available. The can use their time to do one of two things: makepancakes or make hamburgers. Bob can make ten hamburgers in an hour or two pancakes in anhour. Jake can make five pancakes in an hour or one hamburger in a

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

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1.)
both have ten hours of time available. The can use their time to do one of two things: make
pancakes or make hamburgers. Bob can make ten hamburgers in an hour or two pancakes in an
hour. Jake can make five pancakes in an hour or one hamburger in an hour.
Consider a simple exchange economy with two people: Bob and Jake. Bob and Jake
a.) Draw Bob and Jake's PPFS with hamburgers on the x-axis. Give equations for both PPFS in
y=mx+b form.
b.) Who has comparative advantage in the production of hamburgers? Who has comparative
advantage in the production of pancakes?
c.) Can Bob and Jake mutually benefit from trade if the terms of trade are one pancake per
hamburger? Why or why not?

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