Trade/Opportunity Cost: Pat and Kris are roommates. Outside of the time they spend studying, they spend time doing some of their favorite activities: making pizza and brewing root beer. Pat takes 4 hours to brew a gallon of root beer and 2 hours to make a pizza. Kris takes 6 hours to brew a gallon of root beer and 4 hours to make a pizza.
a. Assuming each has 24 hours in which to work, graph and label their PPF’s.
b. What is each roommate’s opportunity cost of making a pizza? Who has the absolute advantage in making pizza? Who has the comparative advantage in making pizza?
c. If Pat and Kris trade with each other, who will trade away pizza in exchange for root beer?
d. If Kris’ brewing equipment becomes damaged such that it now takes Kris 24 hours to brew 1 gallon of root beer, would this change who will trade away pizza? Support your answer in one sentence.