2. Comparative and absolute advantage Gilberto and Juanita are farmers. Each one owns a 20-acre plot of land. The follovwing table shovs the amount of rye and corn each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing rye or corn or to produce rye on some of the land and con on the rest. Rye Corn (Bushels per acre) (Bushels per acre) Gilberto 20 Juanita 28 On the following graph, use the blue line (circle symbol) to plot Gilberto's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Juanita's PPF. 200 180 Gilberto's PPF 160 140 120 Juanita's PPF 100 DRN (Bushes)

2. Suppose that Happy Land produces only two goods-food and suntan oil. Its production possibilities are: Food (pounds per month) 300 200 100 0 Active Land also produces only food and suntan oil, and its production possibilities are: Food (pounds per month) 150 100 50 0 Draw the two PPFs Suntan oil (gallons per month) 0 50 100 150 Suntan oil (gallons per month) 0 100 2000 300 a. What are the opportunity costs of food and suntan oil in Happy Land? b. Why are the opportunity costs the same at each output level? c. What are the opportunity costs of food and suntan oil in Active Land? d. If each nation specialized where they have a comparative advantage; and then traded, find the acceptable ranges for trade. 1 pound of food would have to trade between which values of suntan oil? 1 pound of suntan oil would have to trade between which values of food? e. If each nation produces where they have a comparative advantage, and the terms of trade are 50 pounds of food for 75 gallons of suntan oil,…

Refer to the production possibility frontiers for two friends Frodo and Sam who can both produce Ice creams and Jelly beans. Frodo's maximum production of Ice creams is 500 with no Jelly beans, or 2,000 Jelly beans with no Ice creams. Sam's maximum production of Ice creams is 600 with no Jelly beans, or 1,200 Jelly beans with no Ice creams. ICE CREAMS ICE CREAMS 600 500 1200 JELLY BEANS 2000 JELLY BEANS Frodo' PPF Sam's PPF Answer briefly these TWO questions in the box space provided below. Part A: Assuming efficient production without trade, derive the maximum amount of Jelly beans that can be produced by Sam along with 300 Ice creams. Describe your steps in detail. Part B: Assume that Frodo and Sam agree to specialize in production and trade between themselves. Frodo offers 1,000 Jelly beans to Sam in exchange for 300 lce creams. Would Sam agree to this trade?

7. Specialization and production possibilities Suppose Scotland produces only smart watches and cell phones. The resources that are used in the production of these two goods are not specialized -that is, the same set of resources is equally useful in producing both cell phones and smart watches. The shape of Scotland's production possibilities frontier (PPF) should reflect the fact that as Scotland produces more cell phones and fewer smart watches, the opportunity cost of producing each additional cell phone The following graphs show two possible PPFs for Scotland's economy: a straight-line PPF (PPF₁) and a bowed-out PPF (PPF2). SMART WATCHES PPF ₁ Graph 1 CELL PHONES ? SMART WATCHES PPF₂ Graph 2 CELL PHONES (?) Based on the previous description, the tradeoff Scotland faces between producing cell phones and smart watches is best represented by