Production possibility sets for Asma and Maryam.

Use the information in the table above to answer the following questions: 1) Draw production possibility sets for Asma and Maryam. Measure the quantity of cheese on the horizontal axis. Please use a ruler for drawing purposes. 2) In your production possibility sets identify the points which see Asma and Maryam spending respectively half their time producing cheese and half their time producing bread. 3) Who has an absolute advantage in producing each of the goods? Briefly explain. 4) What are Asma’s and Maryam’s opportunity costs of producing cheese and bread? 5) Who enjoys a comparative advantage in producing cheese and who enjoys a comparative advantage in producing bread. Briefly explain. 6) Assume Asma and Maryam set up a joint business. Who should focus on which activity? Briefly explain. r “4“ Chapter A Parable for the Modern Economy w v ° Two goods. meat and potatoes f I” ‘ ° Two people: rancher and farmer u a» a ° If rancher produces only meat rrr' 1? V: Aw]: 3 ' Interdependence and the ef; -And farmer produces only potatoes Galns from Trade /; - Both gain from trade We. If both rancher and farmer produce both A; meat and potatoes 77:3. “4, -They still gain from specualizatlon and trade Figureé 1 Figureé 1 The production possibilities frontier (a) The production possibilities frontier (b, c) (b) The farmer' 5 production (0) The rancher’ s production Meat (oz) possibilities frontier Meat (oz) possibilities frontier (a) Production Opportunities If there is no trade the If there is no trade, the farmer 24 rancher chooses this ho th' d to a d Minutes needed to Amount produced in gongtslfnsptioivo uc I n n production and consumption. Make 1 ounce of: 8 hours 8 B -Meat Potatoes -Meat Potatoes 12 Farmer 60 min/oz 15 min/oz 8 oz 32 oz 4 ' A Rancher 20 min/oz 10 min/oz 24 oz 48 oz P I h th d t' rt ‘t' 'I bl t th 0 1.6 32 0 2:4 48 faarlrr‘iqee £2213 £212”;er uc ion oppo uni ies avaia e o e Potatoes (oz) Potatoes (02) Panel (b) shows the combinations of meat and potatoes that the farmer can produce. Panel (0) shows the combinations of meat and potatoes that the rancher can produce. Both production possibilities frontiers are derived assuming that the farmer and rancher each work 8 hours per day. If there is no trade, each person' s 3 production possibilities frontier is also his or her consumption possibilities frontier 4