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Q2. Khalid and her Brother Walid want to save some money to pay for their wedding. So, they decided to work to clean cars and
Q2. Khalid and her Brother Walid want to save some money to pay for their wedding. So, they decided to work to clean cars and packing TV. Khalid takes 60 minutes to clean a car and 80 minutes to pack a TV. Walid takes 80 minutes to clean a car and 80 minutes to pack a TV. Khalid and Walid devote 10 hours per week each to these activities and get paid $25 for each car they clean and $25 for each TV they pack. Khalid says to Walid: "I have an absplute advantage in cleaning car, and we are equally productive in packing TV. Therefore, I should do both cleaning car for 6 hours and packing TV for 4 hours, but you should do only packing for 10 hours." Walid disagrees. He thinks Khalid should specialize in cleaning car and he should specialize in packing TV. Help Khalid and Walid to resolve their dispute. (2 marks for each question) a) who has an absolute advantage in cleaning car? In packing TV? Explain. b) Draw Khalid's and Walid's production possibilities frontiers (PPF). What is Khalid's opportunity costs for car cleaning and TV packing? What is Walid's opportunity costs for car cleaning and TV packing? c) Who has a comparative advantage in cleaning car? In packing TV? Explain. (3 marks for question 'd') d) Is Khalid right when she says that she should do both cleaning car and packing TV while Walid should only pack TV? Or maybe Walid is right when he suggests that Khalid specializes in cleaning car and he specializes in packing TV? Explain and substantiate your answer with a numerical example
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