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Problem 1:

  1. Fred and Roy live next door to each other and are considering whether they ought to trade with one another. Using the same resources, each produces wheat (W) and pork (P). Let Fred's PPF for a week is given by W=10-2P and let Roy' PPF for a week be given by W=4-(1/4)P, where wheat is measured in bushels and pork is measured in pounds.

Problem 2:

  1. Show that by specializing in the good in which they have a comparative advantage and then trading with each other both Roy and Fred can consume at least as much of both goods.
  2. Draw the combined PPF for Roy and Fred. Label the x-intercept, the y-intercept, the slope of the PPF and the point at which they are both completely specializing in the good at which they have a comparative advantage.

Business Management, Management Studies

  • Category:- Business Management
  • Reference No.:- M91983181
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