Economics 2 Dr. Kurre Intro Microeconomics Penn State-Erie Third Practice Problem for COMPARATIVE ADVANTAGE Consider two neighbors, Alex and Barb To earn income, each can produce two goods, economics tutoring (“Econ”) and lawnmowing (“lawns”). The following table shows the maximum amounts of each good that they could produce in a given week, if they were to specialize completely in them. Alex Barb Econ 60 50 Lawns 10 5 In other words, if Alex were to produce only Econ tutoring sessions, he could produce 60 per week. If he were to produce only mowed lawns, he could produce 10 per week. Given this information, answer the following questions. 1) Draw the production possibilities curves for each person, putting Econ on the Y axis. (Give each person their own graph, and assume simple linear PPCs.) What is the slope of each PPC? 2) Determine the opportunity cost of each good for each person, assuming that there is no trade. I.e., how many Econ sessions must Alex give up to get another mowed lawn? ...how many lawns to get
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This note was uploaded on 03/25/2008 for the course ECON 004 taught by Professor Graf,pauledwin during the Spring '07 term at Penn State.