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Question 6 Now suppose Abigail has been rescued but John is left on the island. John now produces and consumes sh (F) and coconuts (C)
Question 6 Now suppose Abigail has been rescued but John is left on the island. John now produces and consumes sh (F) and coconuts (C) Assume that, during a certain period, he has decided to work 200 hours and is indifferent as to whether he spends this time shing or gathering coconuts. John's production functions for sh and coconuts are given by F : VIP and C = View, respectively, where (F and lg are the number of hours spent fishing or gathering coconuts. In addition, John's utility function is given by U = VF - C a) If John cannot trade with the rest of the world, how will he choose to allocate his labor? What will be the optimal levels of F and C? What will be his utility? What will be the EFT (of sh for coconuts)? b) Now suppose that trade is opened and John can trade sh and coconuts at a price ratio of \"F = % If John continues to produce the quantities of F and C from Part a), C what will he choose to consume once given the opportunity to trade? What will be his new level of utility? c) How would your answer to Part b) change if John adjusts his production to take advantage of the world prices? (1) Sketch your results for Parts a), b), and c). e) Based on your graph in Part d), what can you say about the impact of free trade on general equilibrium
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