Elif can produce 6 pies or 30 cakes in 1 hour. Ahmet can produce 10 pies or 20 cakes in 1hour A) What is the opportunity cost of producing cakes for Elif? What is the opportunity cost of producing cakes for Ahmet? B) Who has a comparative advantage in producing pies and who has a comparative advantage in producing cakes? C) On the PPF lines, show what Elif produces and what Ahmet produces when they specialize. D) Suppose that they set the exchange price as 1 Pie = 3 Cakes. If they specialize and trade, show an exchange situation that is beneficial for both (compared to the situation you found at part (b))? F) What is the minimum and maximum exchange price they could have determined for an exchange that will be beneficial for both of them?
Elif can produce 6 pies or 30 cakes in 1 hour. Ahmet can produce 10 pies or 20 cakes in 1hour A) What is the opportunity cost of producing cakes for Elif? What is the opportunity cost of producing cakes for Ahmet? B) Who has a comparative advantage in producing pies and who has a comparative advantage in producing cakes? C) On the PPF lines, show what Elif produces and what Ahmet produces when they specialize. D) Suppose that they set the exchange price as 1 Pie = 3 Cakes. If they specialize and trade, show an exchange situation that is beneficial for both (compared to the situation you found at part (b))? F) What is the minimum and maximum exchange price they could have determined for an exchange that will be beneficial for both of them?
Chapter3: The Market And Price System
Section: Chapter Questions
Problem 14E
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Question
Elif can produce 6 pies or 30 cakes in 1 hour. Ahmet can produce 10 pies or 20 cakes in 1hour
A) What is the opportunity cost of producing cakes for Elif? What is the opportunity
cost of producing cakes for Ahmet?
B) Who has acomparative advantage in producing pies and who has a comparative
advantage in producing cakes?
C) On thePPF lines, show what Elif produces and what Ahmet produces when they
specialize.
D) Suppose that they set the exchange price as 1 Pie = 3 Cakes. If they specialize and
trade, show an exchange situation that is beneficial for both (compared to the
situation you found at part (b))?
F) What is the minimum and maximum exchange price they could have determined for
an exchange that will be beneficial for both of them?
cost of producing cakes for Ahmet?
B) Who has a
advantage in producing cakes?
C) On the
specialize.
D) Suppose that they set the exchange price as 1 Pie = 3 Cakes. If they specialize and
trade, show an exchange situation that is beneficial for both (compared to the
situation you found at part (b))?
F) What is the minimum and maximum exchange price they could have determined for
an exchange that will be beneficial for both of them?
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