Question
The following is the scenario and subsequent questions that I need help with. I will put the options given to choose from in parenthesis. Eileen
The following is the scenario and subsequent questions that I need help with. I will put the options given to choose from in parenthesis.
Eileen and Kate 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. Eileen takes 3 hours to brew a gallon of root beer and 2 hours to make a pizza. Kate takes 7 hours to brew a gallon of root beer and 5 hours to make a pizza.
Eileen's opportunity cost of making a pizza is (2/3 gallon, 5/7 gallon, 1 1/2 gallons, or 1 2/5 gallons) of root beer, and Kate's opportunity cost of making a pizza is (2/3 gallon, 5/7 gallon, 1 1/2 gallons, 1 2/5 gallons) of root beer.
(Kate or Eileen) has an absolute advantage in making pizza, and (Kate or Eileen) has a comparative advantage in making pizza.
If Eileen and Kate trade foods with each other, (Eileen or Kate) will trade away 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 (2/3 gallon, 5/7 gallon, 1 1/2 gallons, or 1 2/5 gallons) of root beer, and the lowest price that makes both roommates better off is (2/3 gallon, 5/7 gallon, 1 1/2 gallons, or 1 2/5 gallons) of root beer per pizza.
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