HW M3: Homework - Module 3: Comparative Advantage and Trade

Suppose that Paulie and Vinny each can produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny each can produce in 11 hour, respectively, if they devote all of their time and effort into making the good. Round all answers to two decimal places. Ice cream (cups) | T-shirts (quantity) Paulie | 3.00 | 17.00 Vinny | 7.00 | 12.00 a. What is Paulie's opportunity cost of producing a cup of ice cream? Paulie's opportunity cost: ___________ t‑shirts b. What is Vinny's opportunity cost of producing a t-shirt? Vinny's opportunity cost: ___________ cups of ice cream c. Paulie has a comparative advantage in ___________ and Vinny has a comparative advantage in ___________

a. 5.6 (18/3) b. 1.71 (7/12) c. t-shirts; ice cream.

Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make pizzas. Every ingredient is readily available to them, and the only scarce resource is the cooks' time. Vincent can bake 10 cakes or make 5 pizzas in an hour. Jean can bake 12 cakes or make 8 pizzas in an hour. Please answer the four questions. 1. Which cook has the absolute advantage in baking cakes? 2. Which cook has the absolute advantage in making pizzas? 3. Which cook has the comparative advantage in baking cakes? 4. Which cook has the comparative advantage in making pizzas?

1. Jean 12>10 2. Jean 8>5 3. Vincent 2>1.5 (10/5), (12/8) 4. Jean .67>.5 (5/10), (8/12)

Christine and Paul are deciding how to split their time between writing music and lyrics for their new album. Their PPFs for 72 h of work are shown. Christine and Paul have to write music for 8 songs and lyrics for 12 songs (4 songs already have music). When they are done, they can go to a private island and relax from all their hard work. It is possible that they will use more than 72 h. Music Written (in # of songs) | Lyrics Written (in # of songs) Paul: 6 | 4 Christine: 8 | 9 Once they start writing lyrics and music, assuming their hired help packs for them and their plane is waiting outside their door, in how many hours can they board the plane to their relaxing island getaway?

96 h Christine will write music for 0 songs. Paul will write music for 8 songs. Christine will write lyrics for 12 songs. Paul will write lyrics for 0 songs.

The figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures. Breads (Loaves) | Cake (Units) Kate: 4.00 | 8.00 Sarah: 12.00 | 9.00 Kate has a comparative advantage in Sarah has a comparative advantage in

cake. bread.

Select the correct definition of the term "comparative advantage." When trading with more developed countries,

the ability to produce a good or service at a lower opportunity cost than another less developed countries have a comparative advantage in the production of some goods or services.