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The following table illustrates production capabilities for two woodworkers, Lucy and Joan. The two each can produce birdhouses or chairs. Lucy Joan Birdhouses 40 minutes 20 minutes Chairs

The following table illustrates production capabilities for two woodworkers, Lucy and Joan. The two each can produce birdhouses or chairs. Lucy Joan Birdhouses 40 minutes 20 minutes Chairs 20 minutes 60 minutes The table shows how long it takes each to produce birdhouses and chairs. In other words, it takes Lucy 40 minutes to make a birdhouse, and it takes Joan 20 minutes to make a birdhouse. Assume that there is a time period of 18 hours (1,080 minutes) in which to produce. On your turn-in sheet, complete the following: 1. Draw the PPC for Lucy on the left graph, putting birdhouses on the horizontal axis. Label everything, including the vertical and horizontal intercepts numerically. Draw closely to scale, considering the slope of the function. Do the same for Joan on the right graph. (2 points) 2. Fill out the tables of opportunity costs (see the Dave and Jaime door/window example the notes packet for help and hints). (1 point) 3. Answer the questions about absolute and comparative advantage. (1 point) 4. Assume that Lucy specializes in her comparative advantage. Label the chosen production output combination as point A on the Lucy PPC. Assume that Joan also specializes in her comparative advantage. Label the chosen production output combination as point A on the Joan PPC. (1 point) 5. Based on production times, it is determined that one birdhouse is worth one chair. A trade occurs in which 15 birdhouses are exchanged for 15 chairs. After the trade, Lucy has some birdhouses and chairs. On the Lucy PPC, label this new combination as point B. Numerically show the values of birdhouses and chairs at this point, and make sure it is drawn in the correct position relative to the PPC. Do the same for Joan, drawing a point B on the Joan PPC graph. Hint: You'll have to figure out who had which goods from the previous question. This problem requires some work. (2 points)
Problem A Opportunity cost of making Birdhouses Opportunity cost of making Chairs Lucy Joan has the absolute advantage in making birdhouses. has the absolute advantage in making chairs. has the comparative advantage in making birdhouses. has the comparative advantage in making chairs. Don't forget to draw points A and B on both graphs!

Apr 12 2021 View more View Less

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