ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Brad is an old mechanic on the street, and he can make Cars and Trucks. He gets paid by the hour, but he has a set number of hours available for work when he is building Cars and/or Trucks. In this case, Brad has 5 total hours of work. Each hour of working can produce either 3 Cars or 1 Truck. With that said, Brad has attained quite a great age, and as a result, he has a constraint in his CAR production abilities. Specifically, Brad has to sit down and take his arthritis medication and relax for 1 hour (rest period) after he spends/allocates the first 2 hours producing CARS. This break of rest for his medication is included as a part of Brad's 5-hour workday. As a result, if Brad chooses to work more than 2 hours for the production of CARS (because he loves his work so much), he has to allocate/spend 1 of his total 5 working hours to taking a break to sit down and take his medication. Additionally, Brad trades his Cars and Trucks with outside market merchants so he can earn money to provide for his family. The prices of the goods are as follows: the price (of Cars) is Pc = 1, and the price (of Trucks) is Pt = 4.

Using the information provided, please answer the following parts of the question:

Part A) Draw/Create Brad's PPF (Production Possibilities Frontier) and CPF (Consumption Possibilities Frontier). Please indicate the point of production and shade in the area corresponding to the potential gains from trade by drawing a few lines, dots, etc., in it. Please label the graphs clearly by indicating values for slopes, intercepts, graphical kink(s), and point of production.

Part B) Please explain how you found the PPF and created it with all labels, details, etc.

Part C) Please explain how you found the CPF and created it with all labels, details, etc.

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