What is the opportunity cost of one more candy bar

Reference no: EM133469289

Assignment:

Suppose you won $15 on a Lotto Canada ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. The price of candy bars is $0.75, and the price of peanuts is $1.50.

a) Construct a table showing the alternative combinations of the two products that are available.

b) Plot the data in your table as a budget line in a graph. What is the slope of the budget line? What is the opportunity cost of one more candy bar? Of one more bag of peanuts? Do these opportunity costs rise, fall, or remain constant as each additional unit of the product is purchased?

c) How, in general, would you decide which of the available combinations of candy bars and bags of peanuts to buy?

d) Suppose that you had won $30 on your ticket, not $15. Show the $30 budget line in your diagram. Why would this budget line be preferable to the old one?

France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week.
Draw a production possibilities frontier for each country. Hint: Remember the production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week.
Identify which country has the absolute advantage in green beans and which country has the absolute advantage in tomatoes.
Identify which country has the comparative advantage.
How much would France have to give up in terms of tomatoes to gain from trade? How much would it have to give up in terms of green beans?

Reference no: EM133469289

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