Martha and Stewart each spend eight hours a day wallpapering and painting: Hours Needed to Do One Room Paint 2 hours/room 4 hours/room Wallpaper 8 hours/room 10 hours/room Rooms Finished in 40 Hours Paint 8/2=4 rooms 8/4=2 rooms Wallpaper 8/8=1 room 8/10=0.8 room Martha Stewart Who has the absolute advantage in painting? In wallpapering? What are each person's opportunity costs for painting? For wallpapering? Which person has the comparative advantage in painting? In wallpapering? How do you know?

Martha and Stewart each spend eight hours a day wallpapering and painting: Hours Needed to Do One Room Paint 2 hours/room 4 hours/room Wallpaper 8 hours/room 10 hours/room Rooms Finished in 40 Hours Paint 8/2=4 rooms 8/4=2 rooms Wallpaper 8/8=1 room 8/10=0.8 room Martha Stewart Who has the absolute advantage in painting? In wallpapering? What are each person's opportunity costs for painting? For wallpapering? Which person has the comparative advantage in painting? In wallpapering? How do you know?

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 1CQQ

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. 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.
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Elliot and Jordy find themselves on a deserted island. The only two activities available are fishing and finding pineapples. In a full day, Elliot can catch 6 fish or find 12 pineapples or some linear combination of the two; in the same time, Jordy can catch 4 fish or find 10 pineapples or some linear combination of the two. Assume, initially, that there is no possibility of trade between Elliot and Jordy. If Elliot wishes to consume 4 fish per day, what is the maximum number of pineapples that he could consume each day in addition to the 4 fish? Briefly explain your reasoning. If Jordy wishes to consume 2 fish per day, what is the maximum number of pineapples that he could consume each day in addition to the 2 fish? Briefly explain your reasoning. Now assume that trade is possible between Elliot and Jordy. If they want to continue to consume the same number of fish indicated in part (1), how many additional pineapples would they be able to collectively consume each day relative to…
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Hubert, Manuel, and Shen are fishermen who live next to a lake that is open to fishing; in other words, anyone is free to use the lake for fishing. Assume that these men are the only three fishermen who fish in this lake and that the lake is large enough for all three fishermen to fish intensively at the same time. Each year, the fishermen choose independently how many fish to catch; specifically, they choose whether to fish intensively (that is, to place several fishing lines in the water for long periods of time, which hurts the sustainability of the lake if enough people do it) or to fish nonintensively (which does not hurt the sustainability of the lake). None of them has the ability to control how much the others fish, and each fisherman cares only about his own profitability and not about the state of the lake. Assume that as long as no more than one fisherman fishes intensively, there are enough fish to restock the lake. However, if two or more fish intensively, the lake will…
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