Reference no: EM133285444

Assignment:

Arkey and David find themselves on a deserted island. The only two activities available are fishing and finding pineapples. In a full day, Arkey can catch 6 fish or find 18 pineapples or some linear combination of the two; in the same time, David can catch 5 fish or find 10 pineapples or some linear combination of the two.

1. What are each individual's marginal costs of fishing and finding pineapples? (Must provide the correct answer for full credit, no additional work is necessary) Who has an absolute advantage in fish production? Who has an absolute advantage in finding pineapples? Briefly explain your reasoning. Who has a comparative advantage in fish production? Who has a comparative advantage in finding pineapples? Briefly explain your reasoning.

2. When Arkey and David specialize and trade according to comparative advantage, would trading pineapples for fish on a 1 for 1 basis be acceptable to Arkey without making him worse off? Briefly explain. Would trading fish for pineapples on a 1 for 1 basis be acceptable to David without making him worse off? Briefly explain.

3. Is consuming a bundle of 12 total pineapples and 7 total fish possible for Arkey and David when they specialize and trade? If not, why not? If it is possible, briefly explain how this bundle would be possible (i.e. how many fish and pineapples would each of them need to produce individually in order to achieve this bundle).