Answered: Suppose there are only two planets in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose there are only two planets in the universe, Zenope and Zuranda. On each planet, its inhabitants consume two products—coffee and fried chicken. Each planet has an equal population. Producing solely coffee, Zenope can produce 50 units of coffee, while Zuranda can produce 80 units of coffee. Producing solely fried chicken, Zenope can produce 25 units, while Zuranda can produce 30 units. Fill in the remaining part of the table (be sure to label the units). Coffee Fried Chicken Opportunity Cost of 1unit of Coffee Opportunity Cost of 1 unit of Fried Chicken Zenope 50 units 25 units Zuranda 80 units 30 units 2. Which planet has the absolute advantage in coffee? 3. Which planet has the absolute advantage in fried chicken? 4. Which planet has the comparative advantage in coffee? 5. Which planet has the comparative advantage in fried chicken?

uppose there are only two planets in the universe, Zenope and Zuranda. On each planet, its inhabitan
has an equal population. Producing solely coffee, Zenope can produce 50 units of coffee, while Zuranda
Zenope can produce 25 units, while Zuranda can produce 30 units.
1. Fill in the remaining part of the table (be sure to label the units).
Zenope
Zuranda
Coffee
50 units
80 units
Fried Chicken
25 units
30 units
Opportunity Cost of 1unit of Opportunity Cost of 1
Coffee
unit of Fried Chicken
2. Which planet has the absolute advantage in coffee?
3. Which planet has the absolute advantage in fried chicken?
4. Which planet has the comparative advantage in coffee?
5. Which planet has the comparative advantage in fried chicken?

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Absolute advantage refers to the ability to produce more goods using same resources or same quantity of goods with lesser resources than the competitor. Comparative advantage refers to the ability to produce goods and services at a lower opportunity cost than the competitor.