Identify any point where the mrt changes.

Reference no: EM13669002

2. Consider two individuals, Fred and Barney. In one hour, Fred can produce either 15 gallons of beer, or 3 gallons of wine. In one hour, Barney can produce 2 gallons of beer or 4 gallons of wine. Assume both goods can be produced in continuous quantities.
a) Explain who has the comparative advantage in producing each good. Specific calculations of opportunity cost should be part of your explanation. Use this information to help draw the PPF for the entire economy for one hour if Fred and Barney work together with wine on the horizontal axis. Be sure to put specific numbers on each intercept. Give specific values for the MRT at each point and identify any point where the MRT changes.

b) Assume that each person wants to consume 3 gallons of wine, then as much beer as they can. Determine what each person will end up consuming i) when they cannot trade.
ii) when they can trade at a price of 1gallon wine = 2 gallons beer.
Use this to explain why trade benefits both consumers.

Reference no: EM13669002

Questions Cloud

Describe how an open market sale of t-bills : Describe how an open market sale of T-Bills, carried out by the central bank, affects interest rates, the banking system and real economic activity

Midlevel wines consumed primarily in north america : Golden Star Winery produces midlevel wines consumed primarily in North America

Summary of endogenous and exogenous growth theories : Developing a brief summary of endogenous and exogenous growth theories.

What happens in an multivariate optimization : What happens in an multivariate optimization where the first order condition is a constant?

Identify any point where the mrt changes. : Identify any point where the MRT changes.

Challenges associated with implementation : Write, and the outline or abstract must contain how you plan preliminarily to mitigate or resolve this issue or problem.

The price elasticity of demand for qd elastic or inelastic : The price elasticity of demand for QD elastic or inelastic?

Describe games and which describe decisions : Determine which of the following situation describe games and which describe decisions. In each case, indicate what specific features of the situation caused you to classify it as you did.

The government handout by a dollar : Where each dollar of labor earnings reduces the government handout by a dollar.

User Account

All Pages