1. Consider a market of two farmers which are also consumers. The following table contains the maximum production levels over a time period of 8 hours for both wheat and wine. As usual, we assume linear production possibility frontiers. Wheat Wine 10kg 15kg Farmer Albert 21 11 Berta (a) Identify absolute advantages for each good. (b) Identify comparative advantage. (c) How does the comparative advantage change when calculated over 1 hour of production time? (d) How should Albert and Berta specialise? Who will trade what? (e) Given their production and consumption before trade, Production/Consumption | Wheat Wine Albert 5kg 7.5kg 11 Berta 0.51 Assume production changes to the following .
1. Consider a market of two farmers which are also consumers. The following table contains the maximum production levels over a time period of 8 hours for both wheat and wine. As usual, we assume linear production possibility frontiers. Wheat Wine 10kg 15kg Farmer Albert 21 11 Berta (a) Identify absolute advantages for each good. (b) Identify comparative advantage. (c) How does the comparative advantage change when calculated over 1 hour of production time? (d) How should Albert and Berta specialise? Who will trade what? (e) Given their production and consumption before trade, Production/Consumption | Wheat Wine Albert 5kg 7.5kg 11 Berta 0.51 Assume production changes to the following .
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains From Trade
Section: Chapter Questions
Problem 3CQQ
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