Eco108 HW2

# Eco108 HW2 - ECO 108 Fall 2010 Bo He Name ID Homework 2 Due...

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Bo He Name: __________________________ ID: __________________ Homework 2 Due Mon Sep 20th, at the beginning of LECTURE 1. Kristen and Anna live in the beach town of Santa Monica. They own a small business in which they make wristbands and potholders and sell them to people on the beach. Kristen can make 15 wristbands per hour, but only 3 potholders. Anna is a bit slower and can make only 12 wristbands or 2 potholders in an hour. Output Per hour Kristen Anna Wristbands 15 12 Potholders 3 2 (a) For Kristen and for Anna what is the opportunity cost of a potholder? Who has a comparative advantage in the production of potholders? Explain. (6 pts) (b) Who has a comparative advantage in the production of wristbands? Explain. (6 pts) (c) Assume that Kristen works 20 hours per week in the business. If Kristen were in business on her own, graph the possible combinations of potholders and wristbands that she could produce in a week. Do the same for Anna. (12 pts)

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Eco108 HW2 - ECO 108 Fall 2010 Bo He Name ID Homework 2 Due...

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