q1a.s09 - ENNEC 100 Spring 2009 Quiz 1 Abbreviated Answers...

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ENNEC 100 Spring 2009 Quiz 1 Abbreviated Answers Lowest A: 80; B: 70; C: 60; D: 50 One person failed to put their name on their quiz and was marked down 10 points (for once they claim it). Many students failed to show their work and were graded accordingly. Please wait 24 hours after you get your quiz back before asking questions about the grading. Answer 4 of 5 questions (25 points each). Please show all your work! 1) Barack Obama and Bill Clinton are stuck together on a desert island. There are two goods, turtles (T) and bananas (B). Barack has production function T+B=42, while Bill has production function 2T+5B=40. If they could not trade, Barack would choose to product 28T, while Bill would produce 4B. Now Barack and Bill meet. Explain a production/trade combination that would make both better off. Barack: T=28, B=14. Bill: T=10; B=4. Total is T=38, B=18. Barack’s opportunity cost of Turtles is 1 B while Bill’s is 0.4B. So Bill should specialize in turtles. Many combinations are possible at this point. Here is one: Bill produces all turtles; T=20. So now we need Barack to produce T=18, to get to our earlier total of 38. If Barack product T=18, he gets B=24.
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