Sheila and Jim live in an island where they are the only two workers. Sheila can

Question

Sheila and Jim live in an island where they are the only two workers. Sheila can either catch 10 fish or gather 40 pounds of berries each day, and Jim can either catch 8 fish or gather 24 pounds of berries each day. Both of them work 200 days per year. At current world prices, 1 fish trades for 3.5 pounds of berries (for example, suppose each fish costs $3.50 and each pound of berries costs $1.00). If Sheila and Jim trade on the world market, then on the island they should produce _____ fish and _____ pounds of berries per year.

a) 2000; 4,800

b) 0; 12,800

c) 1,600; 8,000

d) 3,600; 0

Explanation / Answer

Sheila can produce 10 Fish or 40 pounds berries

Jim can produce 8 Fish or 24 pounds berries

Thus, for Sheila, 1 Fish = 4 pounds berries

For Jim, 1 Fish = 3 pounds berries

Hence, opportunity cost of producing fish is higher for Sheila, and thus she should produce berries and Jim should produce fish.

So, in a year (200 days), Sheila will produce 200×40 = 8000 berries

Jim should produce 8×200 = 1600 fish

Rest question is incomplete

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.