Question
1.Zak and Sara each produce two goods: pianos and bricks.Sara can produce 1 piano in an hour, or 10 bricks in an hour.She has 10
1.Zak and Sara each produce two goods: pianos and bricks.Sara can produce 1 piano in an hour, or 10 bricks in an hour.She has 10 hours at her disposal.Zak can produce 2 pianos in an hour, or 8 bricks in an hour.He has 5 hours at his disposal.
a)Who has the absolute advantage in producing pianos?Who has the comparative advantage in producing bricks?Explain both your answers.
b)Draw Zak's PPF and label a point A where he could produce and consume without trading.
c)Zak and Sara strike up a conversation, and decide that they would be better off if each only produced one good, and then they traded.What good will each choose to produce?What can you tell me about the price of pianos (in terms of bricks) that they agreed to trade for?
d)Label the point B where Zak would produce if he specializes.
Pick a price for pianos, and show all possible consumption bundles after he trades with Sara.
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