Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Anna and Barry each have 7 days a week to divide up between two possible activities - canning potatoes and canning cabbage. Below are their
- Anna and Barry each have 7 days a week to divide up between two possible activities - canning potatoes and canning cabbage. Below are their weekly production possibilities showing the maximum amount of each canned food they can produce if they spend all their time on a specific food: For example, if Anna spends all 7 days on potatoes, she can make 100 cans of potatoes and no cans of cabbage. If she spends all 7 days on cabbage, she can make 200 cans of cabbage and no cans of potatoes. She can also divide up her 7 days between the two foods.
Cans of potatoes | Cans of cabbage | |
Anna | 100 cans | 200 cans |
Barry | 120 cans | 150 cans |
- (1) Who has an absolute advantage in canning potatoes? Why?
- (1) Who has an absolute advantage in canning cabbage? Why?
- (2) Who has a comparative advantage in canning potatoes? Why?
- (2) Who has a comparative advantage in canning cabbage? Why?
Continued on next page...
- (1) Suppose Anna spends 3.5 days canning potatoes and 3.5 days canning cabbage.How many cans of each food will she produce?
- (1) Suppose Barry spends 3.5 days canning potatoes and 3.5 days canning cabbage. How many cans of each food will he produce?
- (4) Is there a trade based on the principles of comparative advantage that would increase both Anna's and Barry's amount of canned goods? They could choose to allocate their time differently.Explain.
- (6) The supply curve for tennis balls has shifted due to input cost increases.The equilibrium quantity changed, but the price did not. Nothing else affecting this market changed. Can you say anything about the price elasticity of demand for tennis balls given this information? Include a well-labeled diagram to illustrate your analysis.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started