Sara and Frank produce boards and sails for windsurfing. The tables show their p

Question

Sara and Frank produce boards and sails for windsurfing. The tables show their production possibilities. Each week, Sara produces 8 boards and 6 sails and Frank produces 9 boards and 12 sails. Sara and Frank decide to specialize and trade. specializes in making boards and produces specializes in making sails and produces The number of boards produced by . The number of sails produced by . If Sara and Frank specialize and trade 1 board for 1 sail, gets board from for less than it costs to produce them, and gets sails from for less than its costs to produce them.

Explanation / Answer

From the given production possibilities we can find the opportunity costs for each good for both Sara and Frank.

For Sara

To produce 2 units sails Sara sacrifices 4 units of Boards

To produce 1 unit sails Sara sacrifices 4/2 = 2 units of boards.(opportunity cost of sails)

Similarly for boards

To produce 4 units of extra boards Sara sacrifices 2 units of sails.

To produce 1 unit of extra boards Sara sacrifices 2/4 = 1/2 unit of sails.(opportunity cost of boards)

Similarly for Frank

To produce 6 units sails Frank sacrifices 3 units board.

To produce 1 unit sails Frank sacrifices 3/6 = 1/2 units of board.(opportunity cost of sails)

Similarly opportunity cost of boards turns out to be 2 for Frank.

Thus Sara's opportunity cost of producing boards is 1/2 which is lesser than Frank's opportunity cost of producing boards = 2.Thus Sara must specialise in production of boards.

Frank's opportunity cost for production of sails = 1/2 units of boards while Sara's opportunity cost for production of Sails = 2 units of boards which is higher than Sara's.Hence Frank must specialise in Sails.

Thus Sara specialises in boards and produces 20 boards while Frank specialises in sails and produces 30 sails.

Thus the number of boards produced increases by 3 units.(earlier 8 + 9 boards produced.Now Sara produces 20 boards).Number of sails increases by 12.(earlier 6+12 = 18 sails .Now Frank produces 30 sails.)

If Sara and Frank specialises in boards and sails respectively and trade 1 board for 1 sail , Frank gets boards from Sara for less than it costs Frank to produce.Similarly Sara gets sails from Frank for less than it costs Sara to produce them.

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