Suppose Jilbo can make 18 flower pots or 2 coffee mugs per day. Her cousin Jimbo can make 10 flower pots or 6 coffee mugs per day.
a. Graph both Jilbo and Jimbo's PPFs
b. What is the opportunity cost for Jilbo of producing 1 flower pot? of 18 flower pots?
c. What is the opportunity cost for Jimbo of producing 1 flower pot? or 10 flower pots?
d. Who has the absolute advantage in producing each good?
e. Who has the comparative advantage in producing each good?
f. Which cousin should specialize in each good? and at what price range should each good be traded for?
g. Assume that Jilbo and Jimbo decide to produce the good in which they have a comparative advantage and decide to trade 10 pots for 2 mugs. Draw the amount that Jilbo and Jimbo are able to consume on their respective PPFs. Are they consuming inside or outside their PPFs?
h. Suppose that Jimbo takes a pottery class and improves his productivity in producing both goods He can now make 12 flower pots or 10 mugs per day. Who now has the absolute advantage in the production of each good?
i. Who has the comparative advantage in the production of each good?
j. Which cousin should specialize in each good? and at what price range should each good be traded for?