Question

1. Tina can produce any of the following combinations of goods X and Y: (a) 100X and 0Y, (b) 50X and 25Y, and (c) 0X and 50Y. David can produce any of the following combinations of goods X and Y: (a) 50X and 0Y, (b) 25X and 40Y, and (c) 0X and 80Y. Who has a comparative advantage in the production of good X? Of good Y? Explain your answer.

2. What condition must hold for the production possibilities frontier to be bowed outward (concave downward)? To be a straight line?

3. If the slope of the PPF is the same between any two points, what does this imply about costs? Explain your answer.

4.What exactly allows individuals to consume more if they specialize and trade than if they don’t?

1. Nathan can mow four lawns in a day or plant 20 trees in a day.
   1. Draw Nathan’s production possibilities curve for mowing lawns and planting trees. Assume the production possibilities curve is linear and put the quantity of lawns mowed per day on the horizontal axis and the quantity of trees planted per day on the vertical axis.
   2. What is Nathan’s opportunity cost of planting trees?
   3. What is Nathan’s opportunity cost of mowing lawns?
2. David can mow four lawns in a day or plant four trees in a day.
   1. Draw David’s production possibilities curve for mowing lawns and planting trees. Again, assume a linear production possibilities curve and put the quantity of lawns mowed per day on the horizontal axis.
   2. What is David’s opportunity cost of planting trees?
   3. What is David’s opportunity cost of mowing lawns?
3. Given the production information in problems 1 and 2 above, who has the comparative advantage in planting trees? Mowing lawns?

Answer 1

3)The slope of the PPF is given by marginal rate of transformation that is the rate at which the production of two goods can be switched between each other. If the slope is same then that means it's a linear ppf and constant MRTS. Hence same costs of production.
4) the individuals can get more when they specialize and trade because then they can produce more than needed and trade it for something else. As efficiency increases the production of goods.