2. Working with Numbers and Graphs Q9The following table summarizes the combinations of goods X and Y that two individuals, Nicki and Kamal, can each produce individually.NickiKamalYY3002501503012562.560125If each person specializes in the production of the good for which they have the comparative advantage, thenwould specialize in theproduction of good Y, andwould specialize in the production of good X. (Hint: Calculate the opportunity cost of producing X and Y foreach individual.)Suppose that Kamal and Nicki each specializes in the production of the good in which each has a comparative advantage. Suppose that Kamal and Nicki each specializes in the production of the good in which each has a comparative advantage.Fill in the top row of the following table to indicate Kamal's and Nicki's output of each good.NickiKamalYXYBefore Trade, with SpecializationAfter TradeAfter specialization, suppose the two agree on a price of 3 units of good X for each unit of good Y. When the two individuals make the trade, theyexchange 30 units of good X for 10 units of good Y. Recall that the individual who has specialized in the production of X would trade 30 units of good Xand receive 10 units of good Y, while the individual who specialized in the production of good Y would trade 10 units of good Y and receive 30 units ofgood X.In the previous table, fill in the second row to indicate the amounts of good X and good Y each individual has after the trade.The following graphs plot Nicki's production possibilities frontier (PPF) in purple and Kamal's PPF in blue, respectively.Using the second row of the previous table, plot Nicki's new combination of X and Y with the grey point (star symbol).Kamal150135Kamal's PPFKamal after Trade120105907560453015295887116145174203232 261290True or False: This combination of X and Y was already attainable to these individuals before the trade.O TrueO False

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ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Working with Numbers and Graphs Q9
The following table summarizes the combinations of goods X and Y that two individuals, Nicki and Kamal, can each produce individually.
Nicki
Kamal
Y
Y
300
250
150
30
125
62.5
60
125
If each person specializes in the production of the good for which they have the comparative advantage, then
would specialize in the
production of good Y, and
would specialize in the production of good X. (Hint: Calculate the opportunity cost of producing X and Y for
each individual.)
Suppose that Kamal and Nicki each specializes in the production of the good in which each has a comparative advantage.

Suppose that Kamal and Nicki each specializes in the production of the good in which each has a comparative advantage.
Fill in the top row of the following table to indicate Kamal's and Nicki's output of each good.
Nicki
Kamal
Y
X
Y
Before Trade, with Specialization
After Trade
After specialization, suppose the two agree on a price of 3 units of good X for each unit of good Y. When the two individuals make the trade, they
exchange 30 units of good X for 10 units of good Y. Recall that the individual who has specialized in the production of X would trade 30 units of good X
and receive 10 units of good Y, while the individual who specialized in the production of good Y would trade 10 units of good Y and receive 30 units of
good X.
In the previous table, fill in the second row to indicate the amounts of good X and good Y each individual has after the trade.
The following graphs plot Nicki's production possibilities frontier (PPF) in purple and Kamal's PPF in blue, respectively.
Using the second row of the previous table, plot Nicki's new combination of X and Y with the grey point (star symbol).
Kamal
150
135
Kamal's PPF
Kamal after Trade
120
105
90
75
60
45
30
15
29
58
87
116
145
174
203
232 261
290
True or False: This combination of X and Y was already attainable to these individuals before the trade.
O True
O False

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After specialization, suppose the two agree on a price of 7 units of good X for each unit of good Y. When the two individuals make the trade, they exchange 140 units of good X for 20 units of good Y. Recall that the individual who has specialized in the production of X would trade 140 units of good X and receive 20 units of good Y, while the individual who specialized in the production of good Y would trade 20 units of good Y and receive 140 units of good X.

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