Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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).

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