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Unformatted text preview: oduct enjoyed by one country over another when it uses fewer resources to produce than the other country does. 27
27 Trade – Gillies and Swissies Suppose there exists a tribe of natives on Gilligan’s Island called the Gillies. Suppose there also exists a tribe of natives on Swiss Family Robinson’s island called the Swissies. The two tribes both cut logs for fire and gather nuts for food. 28
28 Trade Gillies and Swissies Suppose the two tribes’ production information for cutting logs & gathering nuts is below:
Tribes # of logs cut in a day # of barrels of nuts collected in a day Gillies 10 5 Swissies 6 2 29
29 Trade Gillies and Swissies Will it benefit the Gillies to trade with the Swissies? – YES!!!!!!!!!!!!!!! Gillies opportunity cost to cut 10 logs is 5 barrels of nuts or the opportunity cost to cut 2 logs is 1 barrel of nuts.
Swissies opportunity cost to cut 6 logs is 2 barrels of nuts or the opportunity cost to cut 3 logs is 1 barrel of nuts.
30 Trade Gillies and Swissies Suppose the Gillies currently consume 6 logs and 2 barrels of nuts. Suppose the Swissies currently consume 3 logs and 1 barrel of nuts. So the total economy consumes 9 cut logs and 3 barrels of nuts. 31
31 Trade – Gillies and Swissies The Production Possibility Frontiers are as follows: Logs Cut
10 Gillies PPF Gillies Current Consumption
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- Spring '08