Trade and opportunity cost

Assignment Help Business Economics

Reference no: EM131245977

Trade/Opportunity Cost: Pat and Kris are roommates. Outside of the time they spend studying, they spend time doing some of their favorite activities: making pizza and brewing root beer. Pat takes 4 hours to brew a gallon of root beer and 2 hours to make a pizza. Kris takes 6 hours to brew a gallon of root beer and 4 hours to make a pizza.

a. Assuming each has 24 hours in which to work, graph and label their PPF’s.

b. What is each roommate’s opportunity cost of making a pizza? Who has the absolute advantage in making pizza? Who has the comparative advantage in making pizza?

c. If Pat and Kris trade with each other, who will trade away pizza in exchange for root beer?

d. If Kris’ brewing equipment becomes damaged such that it now takes Kris 24 hours to brew 1 gallon of root beer, would this change who will trade away pizza? Support your answer in one sentence.

Reference no: EM131245977

Questions Cloud

What is the level of production : A Monopoly firm faces the following demand curve: P=200-0.5Q Where Q is the output and P is price in dollars. The firm's total cost function is given by TC=20,000 + 40Q 1. What is the level of production? 2. What is the price monopolist should charge..

Draw the indifference curve for each consumer : Using an Edgeworth Box, graph the initial allocation and draw the indifference curve for each consumer that runs through the initial allocation. Be sure to label your graph carefully and accurately. What is the marginal rate of substitution for consu..

What happens to transit authority revenue when fare rises : Elasticity: The New York Times reported (Feb. 17, 1996) that subway ridership declined after a fare increase: “There were nearly four million fewer riders in December 1995, the first full month after the price of a token increased 25 cents to $1.50, ..

Supply and demand-hypothesis : Supply and Demand: Suppose a survey shows an increase in illicit drug use by young people in the US. In the ensuing debate, two hypotheses for the increase are proposed: Hypothesis: Reduced police efforts have increased the availability of drugs on t..

Trade and opportunity cost : Trade/Opportunity Cost: Pat and Kris are roommates. Outside of the time they spend studying, they spend time doing some of their favorite activities: making pizza and brewing root beer. What is each roommate’s opportunity cost of making a pizza? Who ..

Find the socially optimal equilibrium price and quantity : You have been hired by the town of Bedford, Ohio, to conduct an analysis of ongoing operations by a local Coca Cola bottler. A study by the Ohio Environmental Protection Agency found that this firms’ water pollution is negatively affecting the enviro..

Three investment opportunities available for period : Linda inherited a sum of $50,000 from one of her grandparents. She would like to wisely invest the inheritance in one of the following three investment opportunities available for a period of 10 years. Help choose the best investment opportunity for ..

Determine optimal prices-marginal user cost in both periods : Assume that the Marginal Cost in period 1 is constant and equal to MC1=$2; and the Marginal Cost in period 2 is also constant and equal to MC2=$4. Determine the dynamic efficient allocation. Determine the optimal prices and marginal user cost in both..

Assuming the money grows at nominal annual interest rate : You are planning to send your child to a summer camp in 9 months. The camp will cost you $1,200 at that time. You have decided to invest a lump sum of money now that will grow to $1,200 by the time it is needed. Assuming the money grows at a nominal ..

User Account

All Pages