Chapter 2

Your friend Sam has been asked to prepare appetizers for a university reception during homecoming weekend. She has an unlimited amount of ingredients but only 6 hours to prepare them. Sam can make 300 mini-sandwiches or 150 servings of melon slices topped with smoked salmon and a dab of sauce per hour. [LO 2.1] a. Draw Sam's production possibilities frontier. b. Now suppose that the university decides to postpone the reception until after the big game, and Sam has an extra 4 hours to prepare. Redraw her production possibilities frontier to show the impact of this increase in resources. c. Now, in addition to the extra time to prepare, suppose Sam's friend Chris helps by preparing the melon slices. Sam can now make 300 mini-sandwiches or 300 melon appetizers per hour. Redraw Sam's production possibilities frontier to show the impact of increased productivity in making melon appetizers.

Your friend Sam has been asked to prepare appetizers for the university reception. She has an unlimited amount of ingredients and 6 hours in which to prepare them. Sam can make 300 minisandwiches or 150 servings of melon slices topped with smoked salmon and a dab of sauce per hour. $\left[{\mathrm{LO}}_{2.1}\right]$ a. What is Sam's opportunity cost of making one mini-sandwich? b. What is Sam's opportunity cost of baking one melon appetizer? c. Suppose the reception has been postponed, and Sam has an extra 4 hours to prepare. What is the opportunity cost of making one mini-sandwich now? d. Suppose the reception has been postponed, and Sam has an extra 4 hours to prepare. What is the opportunity cost of making one melon appetizer now? e. Suppose Sam's friend Chris helps by preparing the melon slices, increasing Sam's productivity to 300 mini-sandwiches or 300 melon appetizers per hour. What is the opportunity cost of making one minisandwich now? f. Suppose Sam's friend Chris helps by preparing the melon slices, increasing Sam's productivity to 300 mini-sandwiches or 300 melon appetizers per hour. What is the opportunity cost of making one melon appetizer now?

Suppose that Canada produces two goods: lumber and fish. It has 18 million workers, each of whom can cut 10 feet of lumber or catch 20 fish each day. $\left[{\mathrm{LO}}_2.1\right]$ a. What is the maximum amount of lumber Canada could produce in a day? b. What is the maximum amount of fish it could produce in a day? c. Write an equation describing the production possibilities frontier, in the form described on pp. $28-29$ d. Use your equation to determine how many fish can be caught if 60 million feet of lumber are cut.

Suppose that three volunteers are preparing cookies and cupcakes for a bake sale. Diana can make 27 cookies or 18 cupcakes per hour; Andy can make 25 cookies or 17 cupcakes; and Sam can make 10 cookies or 12 cupcakes. [LO 2.2] a. Who has the absolute advantage at making cookies? b. At making cupcakes?

Two students are assigned to work together on a project that requires both writing and an oral presentation. Steve can write 1 page or prepare 3 minutes of a presentation each day. Anna can write 2 pages or prepare 1 minute of a presentation each day. [LO 2.2] a. Who has a comparative advantage at writing? b. Suppose that Steve goes to a writing tutor and learns some tricks that enable him to write 3 pages each day. Now who has a comparative advantage at writing?

Suppose that the manager of a restaurant has two new employees, Rahul and Henriette, and is trying to decide which one to assign to which task. Rahul can chop 20 pounds of vegetables or wash 100 dishes per hour. Henriette can chop 30 pounds of vegetables or wash 120 dishes. [LO 2.3] a. Who should be assigned to chop vegetables? b. Who should be assigned to wash dishes?

The Dominican Republic and Nicaragua both produce coffee and rum. The Dominican Republic can produce 20 thousand tons of coffee per year or 10 thousand barrels of rum. Nicaragua can produce 30 thousand tons of coffee per year or 5 thousand barrels of rum. [LO 2.3] a. Suppose the Dominican Republic and Nicaragua sign a trade agreement in which each country would specialize in the production of either coffee or rum. Which country should specialize in coffee? Which country should specialize in producing rum? b. What are the minimum and maximum prices at which these countries will trade coffee?

Eleanor and her little sister Joanna are responsible for two chores on their family's farm, gathering eggs and collecting milk. Eleanor can gather 9 dozen eggs or collect 3 gallons of milk per week. Joanna can gather 2 dozen eggs or collect 2 gallons of milk per week. [LO 2.3] a. The family wants 2 gallons of milk per week and as many eggs as the sisters can gather. Currently, Eleanor and Joanna collect one gallon of milk each and as many eggs as they can. How many dozens of eggs does the family have per week? b. If the sisters specialized, which sister should gather the milk? c. If the sisters specialized, how many dozens of eggs would the family have per week?

Suppose Russia and Sweden each produce only paper and cars. Russia can produce 8 tons of paper or 4 million cars each year. Sweden can produce 25 tons of paper or 5 million cars each year. $\left[{\mathrm{LO}}_{2.4}\right]$ a. Draw the production possibilities frontier for each country. b. Both countries want 2 million cars each year and as much paper as they can produce along with 2 million cars. Find this point on each production possibilities frontier and label it "A." c. Suppose the countries specialize. Which country will produce cars? d. Once they specialize, suppose they work out a trade of 2 million cars for 6 tons of paper. Find the new consumption point for each country and label it "B."