Question

Gomer can make either 200 bushels of corn (C) or 200 bushels of strawberries (S) every six months. Goober can make only 100 bushels of corn (C) or 50 bushels of strawberries (S) every six months.

a) Draw their corresponding production possibilities curves.

b) What is Gomer’s opportunity cost of making one bushel of corn?

c) What is Gomer’s opportunity cost of making one bushel of strawberries?

d) What is Goober’s opportunity cost of making one bushel of corn?

e) What is Goober’s opportunity cost of making one bushel of strawberries?

f) Who has a comparative advantage in making corn?

g) Who has a comparative advantage in making strawberries?

h) Provide terms of trade (price of exchange) between corn and strawberries that would be mutually beneficial to both Gomer and Goober if each specialized and exchanged the product of his comparative advantage.

Answer 1

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