Question

In: Economics

Debra can make either 12 cakes or 16 cookies in 4 hours. Sam can make either...

Debra can make either 12 cakes or 16 cookies in 4 hours. Sam can make either 6 cakes or 12 cookies in 4 hours.

a. Who has an absolute advantage at producing cakes and who has an absolute advantage at producing cookies? Briefly explain your answers.

b. State Debra’s and Sam’s opportunity costs of producing one cake and one cookie. Draw and place your answer in a table.

c. If both Debra and Sam concentrate on producing only the product in which they have a comparative advantage, how many cakes and how many cookies will they produce?

Solutions

Expert Solution

a. Who has an absolute advantage at producing cakes and who has an absolute advantage at producing cookies? Briefly explain your answers.

Absolute advantage at producing cakes

Absolute advantage means more number of output than competitors

Debra can make 12 cakes which is more than Sam

Debra has absolute advantage in producing cakes

Absolute advantage at producing cookies

Absolute advantage means more number of output than competitors

Debra can make 16 cookies which is more than Sam

Debra has absolute advantage in producing cookies

State Debra's and Sam's opportunity costs of producing one cake and one cookie.

Opportunity cost of Debra for 1 cake

= Total cookies / Total cakes = 16 / 12 = 1.33 cookies

Opportunity cost of Debra for 1 cookies

= Total cakes / Total cookies = 12 / 16 = 0.75 cakes

Opportunity cost of Sam for 1 cake

= Total cookies / Total cakes = 12 / 6 = 2 cookies

Opportunity cost of Debra for 1 cookies

= Total cakes / Total cookies = 6 / 12 = 0.5 cakes

If both Debra and Sam concentrate on producing only the product in which they have a comparative advantage, how many cakes and how many cookies will they produce

Comparative advantage means lower opportunity cost.

Debra has lower opportunity cost in producing cakes than Sam, so Debra will produce only cakes.

Sam has lower opportunity cost in producing cookies than Debra , so Sam will produce only cookies.

Debra will produce 12 cakes

Sam will produce 12 cookies

Please rate if it helped

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Sam advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she can charge more.

Sam advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she can charge more. She raises the price to $6 a dozen and sells 40 dozen. What is the elasticity of demand? Assuming that the elasticity of demand is constant, how many would she sell if the price were $10 a box?

Walter White can make a batch of meth in 4 hours and distribute a batch of...

Walter White can make a batch of meth in 4 hours and distribute a batch of meth in 8 hours, and Jesse Pinkman can make a batch of meth in 6 hours and distribute it in 10 hours. Would Walter have the comparative advantage over Jesse in making and distributing meth? A. Yes, Walter has a comparative advantage over Jesse in making and distributing meth. B. No, Jesse has a comparative advantage over Walter in making and distributing meth. C....

Sam can produce either 60 bottles of wine or 40 loaves of bread per month. Dave...

Sam can produce either 60 bottles of wine or 40 loaves of bread per month. Dave can produce either 30 bottles or 30 loaves per month. (Each an also produce mixed combinations of bread and wine at constant opportunity cost.) Suppose they do not trade with one another when we first encounter them. Both are self-sufficient. Sam produces and consumes 36 bottles of wine and 16 loaves of bread, while Dave produces and consumes 20 bottles of wine and 10...

Problem 1Bill can produce either tables orchairs. Bill can work up to 10 hours...

Problem 1Bill can produce either tables or chairs. Bill can work up to 10 hours a day. His production possibilities are given in the table below:TablesChairs01001080206030404020500Construct the production possibilities frontier (PPF) for Bill. Put tables on the Horizontal axis and chairs on the vertical axis.What is Bill’s opportunity cost of producing one additional table?What is Bill’s opportunity cost of producing one additional chair?Currently Bill is producing 20 tables and 40 chairs.Is this allocation of resources efficient? Why?Show this allocation on...

When wage changes, the amount of hours worked can either increase or decrease depending on the...

When wage changes, the amount of hours worked can either increase or decrease depending on the relative strengths of the income and substitution effects. a) Define the income and substitution effects. b) Suppose you initially work 8 hours. Your wage increases and you decide to work 7 hours. Which effect dominates? c) State the range of values that the substitution effect could be in part (b) in terms of hours of leisure. In other words, what is the largest and...

Problem 1 Bill can produce either tables or chairs. Bill can work up to 10 hours...

Problem 1 Bill can produce either tables or chairs. Bill can work up to 10 hours a day. His production possibilities are given in the table below: Tables 0 10 20 30 40 50 chairs 100 80 60 40 20 0 1) Construct the production possibilities frontier (PPF) for Bill. Put tables on the Horizontal axis and chairs on the vertical axis. 2) What is Bill’s opportunity cost of producing one additional table? 3) What is Bill’s opportunity cost of...

Problem 1 Bill can produce either tables or chairs. Bill can work up to 10 hours...

Problem 1 Bill can produce either tables or chairs. Bill can work up to 10 hours a day. His production possibilities are given in the table below: Tables Chairs 0 100 10 80 20 60 30 40 40 20 50 0 Construct the production possibilities frontier (PPF) for Bill. Put tables on the Horizontal axis and chairs on the vertical axis. What is Bill’s opportunity cost of producing one additional table? What is Bill’s opportunity cost of producing one additional...

wellness/stress management workaholic corporate boss working 12 to 16 hours days, with a sedentary life, poor...

wellness/stress management workaholic corporate boss working 12 to 16 hours days, with a sedentary life, poor diet, identify the problems, assess health implications of the problems, identify resources available to support an individual in that circumstance, and develop a plan to improve overall wellness.

Barbara and Joe both have 10 hours of time available, which they can use to either...

Barbara and Joe both have 10 hours of time available, which they can use to either make hotdog or make pizza. Barbara can make 10 pizzas in one hour or 10 hotdogs in one hour. Joe can make 6 pizzas in one hour or 3 hotdogs in one hour. c.) Suppose that Barbara and Joe cannot trade with each other. If Barbara wants to consume an equal number of hotdogs and pizzas, how many hotdogs and pizzas can Barbara consume?...

Suppose in Vietnam a worker can produce either 16 units of cloth or 2 bicycles while...

Suppose in Vietnam a worker can produce either 16 units of cloth or 2 bicycles while in China a worker can produce either 20 units of cloth or 5 bicycles. Suppose each country has 1,000 workers. Currently, each country devotes 40 percent of its labor force to cloth production and 60 percent to bicycle production. What is the output of cloth and bicycles for each country and what is the total output of cloth and bicycles between the two countries?...

Subjects