Hubert and Kate run a catering business in which they have two major tasks: getting new cllenits and preparing food for events and parties. It takes Hubert 15 hours to prepare the food for an event and 3 hours of effort to get each new client. For Kate, it takes 10 hours to prepare food for an event and 5 hours to get a new client. In this scenario, has an absolute advantage In food preparation, and has a comparative advantage in food preparation. Suppose that initially, Hubert and Kate are splitting both tasks for a large number of events. Then they decide to start shifting some work according to the principle of comparative advantege. In particuler, the person with the comparative advantage in food preparation will take over preparing food for one more event by taking the necessary time away from getting more clients, and the other persan will use the freed-up time from not preparing food for one event to get more clients. As a result, the total number of events for which food is prepared will remain unchanged, but the number of new clients will increase by

Hubert and Kate run a catering business in which they have two major tasks: getting new cllenits and preparing food for events and parties. It takes Hubert 15 hours to prepare the food for an event and 3 hours of effort to get each new client. For Kate, it takes 10 hours to prepare food for an event and 5 hours to get a new client. In this scenario, has an absolute advantage In food preparation, and has a comparative advantage in food preparation. Suppose that initially, Hubert and Kate are splitting both tasks for a large number of events. Then they decide to start shifting some work according to the principle of comparative advantege. In particuler, the person with the comparative advantage in food preparation will take over preparing food for one more event by taking the necessary time away from getting more clients, and the other persan will use the freed-up time from not preparing food for one event to get more clients. As a result, the total number of events for which food is prepared will remain unchanged, but the number of new clients will increase by

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 20P: May and Raj me the only two growers who provide organically grown corn to a local grocery store....

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May and Raj me the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the com. If they work independently, they will each earn 100. If they decide to work together and both lower their output, they call each earn 150. If one person lowers output and the other does not, the person who lowers output will earn $1 and the other person will capture the entire market and will earn 200. Table 10.6 represents the choices available to Mary and Raj. What is the best choice for Raj if he is sole that Mary will cooperate? If Mary thinks Raj will cheat, what should Mary do and why? What is the prisoners dilemma result? What is the preferred choice if they could ensure cooperation? A = Work independently; B = Cooperate and Lower Output. (Each results entry lists Rajs earnings first, and Marys earnings second.)
Mary and Raj are the only two growers whoprovide organically grown corn to a local grocery store.They know that if they cooperated and produced lesscorn, they could raise the price of the corn. If theywork independently, they will each earn $100. If theydecide to work together and both lower their output,they can each earn $150. If one person lowers outputand the other does not, the person who lowers outputwill earn $0 and the other person will capture the entiremarket and will earn $200. Table 10.6 represents thechoices available to Mary and Raj. What is the bestchoice for Raj if he is sure that Mary will cooperate? IfMary thinks Raj will cheat, what should Mary do andwhy? What is the prisoner’s dilemma result? What is thepreferred choice if they could ensure cooperation? A =Work independently; B = Cooperate and Lower Output.(Each results entry lists Raj’s earnings first, and Mary'searnings second.)
Van and Amy are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of corn and rye each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing corn or rye or to produce corn on some of the land and rye on the rest. ______ has an absolute advantage in the production of corn, andVan has an absolute advantage in the production of rye. _____ opportunity cost of producing 1 bushel of rye is ______ bushels of corn, whereas Amy's opportunity cost of producing 1 bushel of rye is_____ bushels of corn. Because Van has a______ opportunity cost of producing rye than Amy____ has a comparative advantage in the production of rye, and_____ has a comparative advantage in the production of corn.
Eric and Ginny are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of barley and alfalfa each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing barley or alfalfa or to produce barley on some of the land and alfalfa on the rest. Barley Alfalfa (Bushels per acre) (Bushels per acre) Eric 40 8 Ginny 28 7 ? has an absolute advantage in the production of barley, and has an absolute advantage in the production of alfalfa. Eric's opportunity cost of producing 1 bushel of alfalfa is ? bushels of barley, whereas Ginny's opportunity cost of producing 1 bushel of alfalfa is ? bushels of barley. Because Eric has a ? opportunity cost of producing alfalfa than Ginny, ? has a comparative advantage in the production of alfalfa, and ? has a comparative advantage in the production of barley.
grow cherry tomatoes and catch salmon. The accompanying table shows the maximum annual output combinations oftomatoes and salmon that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for cherry tomato production, there are fewer resources available for catching salmon. CHERRY TOMATOES SALMON 0 1500 500 1400 900 1200 1200 900 1400 500 1500 0 a. Draw a production possibility frontier with cherry tomatoeson the horizontal axis and salmon on the vertical axis illustrating these options, label the points. ( A-F) bi. On your graph put in a point to indicate 500 pounds of salmon and 800 pounds of cherry tomatoes, Label this point ‘G’. Can the economy produce at this point YES or No. Explainwhat the point illustrates.…
Maya and Max are neighbors. Each grows lettuceand tomatoes in their gardens. Maya can grow45 heads of lettuce or 9 pounds of tomatoes thissummer. Max can grow 42 heads of lettuce or6 pounds of tomatoes this summer. If Maya andMax specialize and trade, the price of tomatoes (interms of lettuce) would be as follows: 1 pound oftomatoes would cost between ______ and ______pounds of lettuce
Alexi and Tony own a food truck that serves only twoitems, street tacos and Cuban sandwiches. As shownin the table, Alexi can make 80 street tacos per hourbut only 20 Cuban sandwiches. Tony is a bit faster andcan make 100 street tacos or 30 Cuban sandwiches inan hour. Alexi and Tony can sell all the street tacos andCuban sandwiches that they are able to produce.Output Per HourStreet Tacos Cuban SandwichesAlexi 80 20Tony 100 30a. For Alexi and for Tony, what is the opportunity cost of a street taco? Who has a comparative advantage in the pro-duction of street tacos? Explain your answer. b. Who has a comparative advantage in the production ofCuban sandwiches? Explain your answer. Assume that Alexi works 20 hours per week in thebusiness. Assuming Alexi is in business on his own, graphthe possible combinations of street tacos and Cubansandwiches that he could produce in a week. Do the samefor Tony.d. If Alexi devoted half of his time (10 out of 20 hours) tomaking street tacos and half of…
lexi and Tony own a food truck that serves only two items, street tacos and Cuban sandwiches. As shown in the table, Alexi can make 80 street tacos per hour but only 20 Cuban sandwiches. Tony is a bit faster and can make 100 street tacos or 30 Cuban sandwiches in an hour. Alexi and Tony can sell all the street tacos and Cuban sandwiches that they are able to produce.Output Per HourStreet Tacos Cuban SandwichesAlexi 80 20Tony 100 30a. For Alexi and for Tony, what is the opportunity cost of a street taco? Who has a comparative advantage in the pro-duction of street tacos? Explain your answer.b. Who has a comparative advantage in the production of Cuban sandwiches? Explain your answer.c. Assume that Alexi works 20 hours per week in the business. Assuming Alexi is in business on his own, graph the possible combinations of street tacos and Cuban sandwiches that he could produce in a week. Do the same for Tony.d. If Alexi devoted half of his time (10 out of 20 hours) to making street tacos…
The Boswell Fruit Farm produces only oranges and papaya. Table 1 below shows the maximum possible output combinations of the two fruits using all resources and currently available technology. Answer the questions below and show calculations where appropriate. Graph the Fruit Farm's production possibilities frontier. Put oranges on the horizontal axis and papayas on the vertical axis. Be sure to identify the output combination points on your diagram. Suppose the Fruit Farm is currently producing at point F. What is the opportunity cost of producing an additional 20,000 kilos of oranges? Suppose the Fruit Farm is plagued by a maggot infestation which destroys orange trees but not papayas. Explain with a graph what happens to the PPF. Which of the possible output combinations represent the lowest opportunity cost for one thousand kilo of papayas? Show your calculation to support your answer.
. Diego and Darnell are roommates. They spend mostof their time studying (of course), but they leavesome time for their favorite activities: making pizzaand brewing root beer. Diego takes 4 hours to brewa gallon of root beer and 2 hours to make a pizza.Darnell takes 6 hours to brew a gallon of root beerand 4 hours to make a pizza.a. What is each roommate’s opportunity cost ofmaking a pizza? Who has the absolute advantagein making pizza? Who has the comparativeadvantage in making pizza?b. If Diego and Darnell trade foods with each other,who will trade away pizza in exchange for rootbeer?c. The price of pizza can be expressed in terms ofgallons of root beer. What is the highest price atwhich pizza can be traded that would make bothroommates better off? What is the lowest price?Explain.
Suppose the production possibility frontier for cheese-burgers (C) and milkshakes (M) is given by C + 2M = 600 a. Show working and graph this frontier. b. Assuming that people prefer to eat two cheeseburgers with every milkshake, how much of each product will be produced? show working and indicate this point on the graph. c. Given that this fast-food economy is operating efficiently, what price ratio (PC/PM) must prevail? show working
A6. 1.Adam and Zoey are competing fish and chips sellers in Linear City. They are located at the twoopposing ends of the town’s 3-mile-long Main Street. The 1700 inhabitants of the town are distributeduniformly on Main Street and each of them eats at most one portion of fish and chips for lunch. People’sdisutility from getting to a fish and chips stand and back home amounts to $2 for each mile of distanceto the stand. The marginal cost of producing one portion of fish and chips is $9. The consumers areuniformly distributed along the street. Each consumer has a valuation of $29.0 for the product. Supposethat both Zoey and Adam can advertise at zero cost to inform everyone about their business. Find theequilibrium price of Zoey if neither of the two sellers advertises.