Question

1. Anne and Nancy are stranded on a deserted island where they survive by catching fish and picking mangoes. In one day, Anne can catch 4 fish or pick 12 mangoes and Nancy can catch 8 fish or pick 8 mangoes. When they are separated each chooses to spend half of their day on each good.

a. What is the marginal cost of a fish for Anne and what is it for Nancy?

b. Who has a comparative advantage in fish and who in mangoes?

c. Draw the PPF for both Anne and Nancy combined. Label the slopes and intercepts and include a point representing the combination of fish and mangoes that they consume (combined) when they separated. Label this point “X.”

d. If Anne and Nancy are NOT separated and want to organize their labor in the most efficient way, and they want to keep getting the same number of fish as when they were separated, how many mangoes can they get?

2. a. On a graph of supply and demand, show what will happen to the equilibrium price and quantity of oil if an enormous deposit of oil is discovered underneath the south pole.

b. On another graph, show what will happen to the price and quantity of oil if a new type of electric car is invented which is inexpensive and can run for a thousand miles on a single charge.

Answer 1

OUV Date Na 4 ab cat sl lnart to 21 ナ