Question

4.) Suppose now that instead Rachel and Lauren are going to grow their own watermelons and tomatoes. If Rachel dedicates all her time to growing watermelons, she will grow 4 watermelons. If she spends all her time growing tomatoes, she will grow 3 tomatoes. If Lauren spends all her time growing watermelons, she will grow 2 watermelons. And if Lauren spends all her time growing tomatoes, she will grow 2 tomatoes. If they allocate time to both, they will produce a bundle somewhere along the linear curve between these intercepts. (20 points)

a. Draw the individual PPF’s for Rachel and Lauren on separate graphs.

b. Who has the comparative advantage in watermelons? Show how you know.

c. Rachel has an absolute advantage in both goods. Does it make sense for them still to trade?

d. Draw the PPF with trade.

Answer 1

CLASSTIME PO. No Date (y Rachael 4 watermelons or 3 tondog 2 watermelon or a somatoes Tomatoes 3 B lachat PPF lauren RPF Wakkinden 2 3 4 !?? 2 Rachael has CA in watermelons lauren has CA in Tomatoes ble opp cost of I Waterndors for Rached = 0.75dom for Lauren = 1 tonatos (11) Yes still fachad con benefit by bading 4 accorda producing comparative Advantage form of trade has to be in 0.8Tomato Si Watermelon Sl tomato ho