Question 2 ( Cinderella can produce 10 Burgers or 4 Pizzas per day while Snow White can produce 20 Burgers or 6 Pizzas per day. a. b. c. d. e. f. If Cinderella and Snow White live in two different countries, draw their respective PPF, with Burger on the Y axis and Pizza on the X axis. Who has absolute advantage in the production of Burger and who has absolute advantage in the production of Pizza? Calculate the opportunity costs of producing Burgers and Pizzas by Cinderella and Snow White. Who has comparative advantage in Burger production and who has comparative advantage in Pizza production? Without trade, Cinderella and Snow White will spend half of the ir time producing each good. But if trade is possible, Cinderella will specialize entirely in what she is good at doing while Snow White will spend 80% of her time producing the good which she has comparative advantage in (with the remaining 20% of the time spent on producing the other good. Find out the amount of each good produced with and without trade (assume that the units are divisible). Show that an exchange of 3 Burgers for 1 Pizza is something both ladies will find acceptable, and show how they end up better off compared to the no-trade situation. If Cinderella and Snow White live in the SAME country, will the PPF of this single country be a straight line? Give a reason for this. Draw the PPF with the ladies each specializing completely in what they have comparative advantages.
Question 2 ( Cinderella can produce 10 Burgers or 4 Pizzas per day while Snow White can produce 20 Burgers or 6 Pizzas per day. a. b. c. d. e. f. If Cinderella and Snow White live in two different countries, draw their respective PPF, with Burger on the Y axis and Pizza on the X axis. Who has absolute advantage in the production of Burger and who has absolute advantage in the production of Pizza? Calculate the opportunity costs of producing Burgers and Pizzas by Cinderella and Snow White. Who has comparative advantage in Burger production and who has comparative advantage in Pizza production? Without trade, Cinderella and Snow White will spend half of the ir time producing each good. But if trade is possible, Cinderella will specialize entirely in what she is good at doing while Snow White will spend 80% of her time producing the good which she has comparative advantage in (with the remaining 20% of the time spent on producing the other good. Find out the amount of each good produced with and without trade (assume that the units are divisible). Show that an exchange of 3 Burgers for 1 Pizza is something both ladies will find acceptable, and show how they end up better off compared to the no-trade situation. If Cinderella and Snow White live in the SAME country, will the PPF of this single country be a straight line? Give a reason for this. Draw the PPF with the ladies each specializing completely in what they have comparative advantages.
Chapter2: Economic Tools And Economic Systems
Section: Chapter Questions
Problem 3.6P
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Transcribed Image Text:Question 2 (
Cinderella can produce 10 Burgers or 4 Pizzas per day while Snow White can produce
20 Burgers or 6 Pizzas per day.
a.
b.
c.
d.
e.
f.
If Cinderella and Snow White live in two different countries, draw
their respective PPF, with Burger on the Y axis and Pizza on the X axis.
Who has absolute advantage in the production of Burger and who has
absolute advantage in the production of Pizza?
Calculate the opportunity costs of producing Burgers and Pizzas by
Cinderella and Snow White. Who has comparative advantage in Burger
production and who has comparative advantage in Pizza production?
Without trade, Cinderella and Snow White will spend half of the ir
time producing each good. But if trade is possible, Cinderella will specialize
entirely in what she is good at doing while Snow White will spend 80% of her
time producing the good which she has comparative advantage in (with the
remaining 20% of the time spent on producing the other good. Find out the
amount of each good produced with and without trade (assume that the units are
divisible).
Show that an exchange of 3 Burgers for 1 Pizza is something both
ladies will find acceptable, and show how they end up better off compared to
the no-trade situation.
If Cinderella and Snow White live in the SAME country, will the PPF
of this single country be a straight line? Give a reason for this. Draw the PPF
Transcribed Image Text:with the ladies each specializing completely in what they have comparative
advantages.
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