Answered: Robinson and Friday are trapped on an…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Robinson and Friday are trapped on an island together and can produce Fish (F) or Coconuts (C) with the time they have on any given day. Let LF and LC denote labor hours dedicated to fishing or gathering coconuts, respectively.

Robinson's technological relationships for producing coconuts is given by:

CRobinson=14LC

Friday's technological relationship for producing coconuts is given by:

CFriday=12LC

Which of the following is true? (check all that apply)

If Robinson and Friday both use the same (positive) number of hours of labor to harvest coconuts, Robinson will always be able to harvest more.

Robinson has the comparative advantage in coconut production

Friday has the absolute advantage in coconut production

Both Robinson's and Friday's marginal productivity of labor decreases as they spend more time harvesting coconuts

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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