ECON 200 Homework 4 - ECON 200 Homework 4 Due Wednesday 1...

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Unformatted text preview: ECON 200 Homework 4 Due Wednesday, 1/27/10 1. Jane and Beth are planning on opening a bakery. In a typical day, Jane can make 4 pies and 2 cakes. Beth can make 3 pies or 6 cakes in a day. a). If they don't coordinate their baking (i.e. each person bakes independently, without planning with the other person) and each one of them makes 2 pies, how many cakes will they each be able to make? Draw each of their production possibility frontiers separately. b). What is each girl's marginal cost of making pies in terms of cakes? What are their marginal costs of making cakes in terms of pies? Who has the comparative advantage in cake and who has the comparative advantage in pies? c). Draw their combined production possibility frontier if they decide to coordinate their baking. Now how many cakes can they make combined if they decide to make 4 pies total? d). Explain why they are better off coordinating their baking work than each baking independently. ...
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