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Information on the labor productivity of alpha and beta islands in producing pigs and coconuts. Students are required to determine each country's absolute and comparative advantages, calculate opportunity costs, and analyze the production and consumption points after trade. Diagrams and a table.
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APRIL 28. You may NOT turn in this problem after class begins on Thursday, April 30, because we will be going over this problem in class****. NAME_______________________________ TOTAL POINTS = 40. Alpha and Beta , two tiny islands, produce pigs and coconuts with labor only. The following table showing labor productivity in each industry outlines their respective technologies: TECHNOLOGY Labor Productivity: Output per unit of labor PIGS COCONUTS ALPHA 1.2 3 BETA 10 4 a. Which country has absolute advantage in the production of pigs? Of coconuts? Explain briefly. (4 points) The technology above implies the following production possibilities curves ( PPC’s ) for each country. ALPHA’s PPC (10 units of labor) BETA’s PPC (5 units of labor) PIGS COCONUTS PIGS COCONUTS 0 30 0 20 2 25 10 16 4 20 20 12 6 15 30 8 8 10 40 4 10 5 45 2 12 0 50 0 b. Graph each country’s PPC in the diagrams on page 4. ( points)
c. Calculate the opportunity cost of producing pigs and coconuts in Alpha. Calculate the opportunity cost of producing pigs and coconuts in Beta. SHOW WORK. (8 points) d. Which country has comparative advantage in the production of pigs? Of coconuts? Explain thoroughly. (4 points)
Coconuts 30 25 20 15 10 5 0 2 4 6 8 10 12 Pigs BETA Coconuts 20 16 12 8 4 2 0 10 20 30 40 45 50 Pigs