Question

In: Economics

Lobster Dinner. Red pants Cape Cod. 2. 6 Nantucket. 1. 5 According to table: If Cape...

Lobster Dinner. Red pants
Cape Cod. 2. 6
Nantucket. 1. 5
According to table: If Cape Cod and Nantucket were to trade lobster dinners and red pants, what is the range of possible prices (ie: prices acceptance to both locations) for a pair of red pants.
a. 1/5 of a lobster dinner to 1/3 of lobster dinner per pair red pants
b. 1/3 of a lobster dinner to 1/2 lobster per pair of red pants
c. 2 lobster dinners to 6 lobster dinners per pair red pants
d. 3 lobster dinners to 5 lobster dinner per pair of red pants

Solutions

Expert Solution

Solution:

a) 1/5 of a lobster dinner to 1/3 of lobster dinner per pair red pants.

Explanation:

To find the range of possible prices for a pair of red pants is found by calculating the oppurtunity cost of lobster for both of them

Opportunity cost of 1 lobster dinner in Cape Cod = lobster dinner/ red pants = 2/6 = 1/3 red pants
Opportunity cost of 1 lobster dinner in Nantucket = lobster dinner/ red pants = 1/5 red pants


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