Question

9. Working with Numbers and Graphs Q9 The following table summarizes the combinations of goods X and Y that two individuals, Tina and David, can each produce individually. Tina David 250 02000 125 62.5 100 10 0 125 0 20 If each person specializes in the production of the good for which they have the comparative advantage, then production of good Y, an individual.) ▼ would specialize in the d would specialize in the production of good X. (Hint: Calculate the opportunity cost of producing X and Y for each Suppose that David and Tina each specializes in the production of the good in which each has a comparative advantage. Fill in the top row of the following table to indicate David's and Tina's output of each good. Tina David Before Trade, with Specialization After Trade After specialization, suppose the two agree on a price of 3 units of good X for each unit of good Y. When the two individuals make the trade, they exchange 150 units of good X for 50 units of good Y. Recall that the individual who has specialized in the production of X would trade 150 units of good X and receive 50 units of good Y, while the individual who specialized in the production of good Y would trade 50 units of good Y and receive 150 units of good X. In the previous table, fill in the second row to indicate the amounts of good X and good Y each individual has after the trade. The following graphs plot Tina's production possibilities frontier (PPF) in purple and David's PPF in blue, respectively. Using the second row of the previous table, plot Tina's new combination of Xand Ywith the grey point (star symbol)

a) True

b) False

Note: This whole problem is just one question but consists of many parts. I would highly, extremely appreciate it if someone could solve this whole thing for me, this is tricky.

Answer 1

Tina:

250 X = 125 Y

X = 125/250 = 0.5 Y

Y = 250/125 = 2 X

Opportunity cost of 1 X is 0.5 Y and 1 Y is 2 X.

David:

200 X = 20 Y

1 X = 20/200 = 0.1 Y

1 Y = 200/20 = 10 X

Opportunity cost of 1 X is 0.1 Y and 1 Y is 10 X.

Since, opportunity cost of producing X is lower when it is produced by David. So, David has comparative advantage in the production of X and Tina has comparative advantage in the production of Y.

20000 Before Trade, with Specialization After Trade 12% 150 | 125-50+75 1200-150-50 50

A) True

Before trade, person can consume only bundles which lies below or on PPF.