1. PPF and CPF - Jane and Tarzan can produce food and luxury goods. • Tarzan's production possibilities frontier (PPF) is defined by Qarzan + 6QFarzan = 12 where QIarzan is the quantity of luxury goods and QFarzan is the quantity of food produced by Tarzan. • Jane has 8 hours of work. Each hour of work yields 1 unit of food or 2 units of luxury goods. Here are three independent scenarios. a. Scenario 1: Suppose that Tarzan and Jane trade with each other (i.e., no outside merchants). Tarzan and Jane agree to trade goods under the following conditions: 1) the terms of trade are 1 unit of food in exchange for 3 units of luxury goods; and 2) each specializes according to his/her comparative advantage. Sketch on two different graphs (one for Tarzan and one for Jane) the individual PPFS, the individual CPFS, the individual points of production, and shade the areas corresponding to the gains from trade. Clearly label your graphs (i.e., indicate values for slopes, intercepts, endpoint(s). and points of production). Note that luxury goods are on the y-axis and food is on the x-axi
1. PPF and CPF - Jane and Tarzan can produce food and luxury goods. • Tarzan's production possibilities frontier (PPF) is defined by Qarzan + 6QFarzan = 12 where QIarzan is the quantity of luxury goods and QFarzan is the quantity of food produced by Tarzan. • Jane has 8 hours of work. Each hour of work yields 1 unit of food or 2 units of luxury goods. Here are three independent scenarios. a. Scenario 1: Suppose that Tarzan and Jane trade with each other (i.e., no outside merchants). Tarzan and Jane agree to trade goods under the following conditions: 1) the terms of trade are 1 unit of food in exchange for 3 units of luxury goods; and 2) each specializes according to his/her comparative advantage. Sketch on two different graphs (one for Tarzan and one for Jane) the individual PPFS, the individual CPFS, the individual points of production, and shade the areas corresponding to the gains from trade. Clearly label your graphs (i.e., indicate values for slopes, intercepts, endpoint(s). and points of production). Note that luxury goods are on the y-axis and food is on the x-axi
Chapter2: Productions Possibilities, Opportunity Costs, And Economic Growth
Section: Chapter Questions
Problem 8SQ
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Transcribed Image Text:1. PPF and CPF-
Jane and Tarzan can produce food and luxury goods.
Tarzan's production possibilities frontier (PPF) is defined by QTarzan + 6QȚarzan = 12 where
QEarzan is the quantity of luxury goods and QFarzan is the quantity of food produced by Tarzan.
Jane has 8 hours of work. Each hour of work yields 1 unit of food or 2 units of luxury goods.
Here are three independent scenarios.
a. Scenario 1: Suppose that Tarzan and Jane trade with each other (i.e., no outside merchants).
Tarzan and Jane agree to trade goods under the following conditions: 1) the terms of trade are
1 unit of food in exchange for 3 units of luxury goods; and 2) each specializes according to
his/her comparative advantage. Sketch on two different graphs (one for Tarzan and one for
Jane) the individual PPFS, the individual CPFS, the individual points of production, and shade the
areas corresponding to the gains from trade. Clearly label your graphs (i.e., indicate values for
slopes, intercepts, endpoint(s). and points of production). Note that luxury goods are on the
y-axis and food is on the x-axi
Q[arzan
TARZAN
Qļane
clane
JANE
QIarzan
Carzan
Qlane
clane
2
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