Question

An economy has two workers, Anne and Bill. Per day of work, Anne can pick 120 apples or 60 bananas, and Bill can pick 140 apples or 140 bananas. Anne and Bill each work 200 days per year.

b. Assuming that only one fruit is picked in this economy, then the maximum number of each type of fruit that can be picked annually is either apples or bananas.

c. If each worker fully specializes according to his or her comparative advantage, the maximum number of apples that can be picked annually is , and the maximum number of bananas is .

Answer 1

Given that,

Anne can pick 120 apples or 60 bananas per day & Bill can pick 140 apples or 140 bananas per day

Number of days of work = 200 days per year for each person

b. If only apples are picked in the economy, the

Production of Anne = Number of apples picked by Anne per day x Number of days = 120 x 200 = 24,000

Production of Bill = Number of apples picked by Bill per day x Number of days = 140 x 200 = 28,000

The maximum number of apples that can be picked in a year = 24,000 + 28,000 = 52,000 apples

If only bananas are picked in the economy, the

Production of Anne = Number of bananas picked by Anne per day x Number of days = 60 x 200 = 12,000

Production of Bill = Number of bananas picked by Bill per day x Number of days = 140 x 200 = 28,000

The maximum number of bananas that can be picked in a year = 12,000 + 28,000 = 40,000 bananas

c. Anne can pick 120 apples or 60 bananas per day

The opportunity cost of picking 1 apple for Anne is (60/120) = 0.5 bananas

The opportunity cost of picking 1 banana for Anne is (120/60) = 2 apples

Bill can pick 140 apples or 140 bananas per day

The opportunity cost of picking 1 apple for Bill is (140/140) = 1 banana

The opportunity cost of picking 1 banana for Bill is (140/140) = 1 apple

As the opportunity cost of picking 1 apple is lower for Anne, Anne has a comparative advantage in picking apples

As the opportunity cost of picking 1 banana is lower for Bill, Bill has a comparative advantage in picking bananas

As calculated in (b), if Anne specializes in picking apples, he can pick 24,000 apples per year and if Bill specializes in picking bananas, then he can pick 28,000 bananas.

Therefore, if each worker fully specializes according to his/her comparative advantage, the maximum number of apples that can be picked annually is 24,000, and the maximum number of bananas is 28,000