Principles Of Microeconomics
7th Edition
ISBN: 9781260111088
Author: Robert H. Frank, Ben Bernanke, Kate Antonovics, Ori Heffetz
Publisher: McGraw-Hill Education
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Chapter 2, Problem 2.2CC
To determine
Attainable points on the given
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Elif can produce 6 pies or 30 cakes in 1 hour. Ahmet can produce 10 pies or 20 cakes in 1hour.a) Draw the PPF lines for Elif and Ahmet.b) If each spends 30 minutes of each hour for producing pies and 30 minutes for producing cakes, how many pies and cakes does each produce?c) What is the opportunity cost of producing pies for Elif? What is the opportunity cost of producing pies for Ahmet?d) What is the opportunity cost of producing cakes for Elif? What is the opportunity cost of producing cakes for Ahmet?e) Who has a comparative advantage in producing pies and who has a comparative advantage in producing cakes?f) On the PPF lines, show what Elif produces and what Ahmet produces when they specialize.g) Suppose that they set the exchange price as 1 Pie = 3 Cakes. If they specialize and trade, show an exchange situation that is beneficial for both (compared to the situation you found at part (b))?h) What is the minimum and maximum exchange price they could have determined for an exchange…
Suppose Sarah and Julia both work at a bakery making bread and muffins. In an hour, Sarah can either make 10 loaves of bread or 40 muffins, while Julia can either make 12 loaves of bread or 60 muffins. Both Sarah and Julia work 8 hours a day.
a) Draw the daily PPF for Sarah and Julia
b) What is the opportunity cost to each of making one loaf of bread?
c) Suppose you are the owner of the bakery. If Julia and Sarah are currently both spending all of their time making muffins, then which of them should you ask to start making bread? Explain your answer.
Suppose there are two bakers in town: Sarah and Amy. Sarah can bake 4 loaves of bread or 8 pies in one day. Amy can bake 6 loaves
of bread or 2 pies in one day. Please do the following:
(a) Calculate the opportunity cost for both Sarah and Amy for baking pies and bread
(b) Draw both Sarah and Amy's PPF curve
(c) Who has an absolute advantage in baking bread? In baking pies?
(d) Who has a comparative advantage in baking bread? In baking pies?
(e) Determine a specific trade (i.e. give me numbers) that would make both Sarah and Amy better off.
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Principles Of Microeconomics
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