Question

In: Economics

In one hour Sonny can make 5 quarts of sauce or 20 meatballs. In one hour,...

In one hour Sonny can make 5 quarts of sauce or 20 meatballs. In one hour, Fredo can make 2 quarts of sauce or 12 meatballs. Suppose each person wants to have one quart of sauce whether he's cooking on his own or trading. If Sonny and Fredo specialize and trade according to comparative advantage, they will be able to produce which of the following combinations in total?
A) Two quarts of sauce and 20 meatballs.

B) Two quarts of sauce and 27 meatballs.

C) Five quarts of sauce and 12 meatballs.

D) Two quarts of sauce and 24 meatballs.

Correct answer is D but i need an explanation.

Expert Solution

Opportunity cost of quarts for Sonny=20/5=4 meatballs per quarts

Opportunity cost of quarts for Fredo=12/2=6 meatballs per quarts

Opportunity cost of meatballs for Sonny=5/20=0.25 quarts per meatballs

Opportunity cost of meatballs for Fredo=2/12=0.17 quarts per meatballs

Sonny will produce quarts because they have low Opportunity cost while Fredo will produce meatballs because they have low opportunity

However, as they need only two quarts, so Sonny will produce only two quarts and remaining time he will use for meatballs

Sonny will produce one quarts=60/5=12 minutes

so for two quarts, Sonny will take=12*2=24 minutes

there will be remaining 36 minutes for Sonny to produce meatball

Sonny will produce meatballs in 36 minutes=36/(60/20)=12 meatballs

total meatballs to be produced=Sonny will produce meatballs in 36 minutes+Fredo will produce meatballs

=12+12

=24 meatballs
so answer will be

D) Two quarts of sauce and 24 meatballs.

the above is answer..

Rahul Sunny answered 2 years ago

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