Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ana and Dina are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza

Ana and Dina are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Ana takes 3 hours to brew a gallon of root beer and 2 hours to make a pizza. Dina takes 7 hours to brew a gallon of root beer and 5 hours to make a pizza.

Ana's opportunity cost of brewing a gallon of root beer is , and Dina's opportunity cost of brewing a gallon of root beer is .

has an absolute advantage in brewing root beer, and has a comparative advantage in brewing root beer.

If Ana and Dina trade foods with each other, will trade away pizza in exchange for root beer.

The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates better off is of root beer, and the lowest price that makes both roommates better off is of root beer per pizza

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Jan Williams, Susan Haka

17th Edition

126000645X, 9781260006452

More Books

Students also viewed these Economics questions

Question

Review behavior therapy techniques based on operant conditioning.

Answered: 1 week ago

Question

What is the formula to calculate the mth Fibonacci number?

Answered: 1 week ago