Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

Sharon and Amy 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. Sharon takes 3 hours to brew a gallon of root beer and 2 hours to make a pizza. Amy takes 7 hours to brew a gallon of root beer and 5 hours to make a pizza.

Sharon's opportunity cost of making a pizza is (32,121,75,152 ) of root beer. (Sharon or Amy) has an absolute advantage in making pizza, and (Sharon or Amy) will trade 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 (32,75,121,152 ) of root beer, and the lowest price that makes both roommates better off is (32,75,121,152 ) of root beet 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

Research In Forest Economics And Forest Policy

Authors: Marion Clawson

1st Edition

1317362624, 9781317362623

More Books

Students also viewed these Economics questions

Question

6. How can hidden knowledge guide our actions?

Answered: 1 week ago