In a full day, Mutt can Catch 3 fish or 9 rabbits; Jeff can catch 4 fish or 2 ra

Question

In a full day, Mutt can Catch 3 fish or 9 rabbits; Jeff can catch 4 fish or 2 rabbits. When acting alone, Mutt consumes 2 fish and Jeff consumes 2 fish also. How many rabbits can each person consume, acting alone? After taking some ECON 200 class, the two decide to specialize and trade. Assume that they continue consume 2 fish each: Who will specialize in catching rabbits? Who in fish? What is their joint gain (net gain) from specialization and trade Give a plausible term of trade, say, how many rabbits has to be paid for one fish Draw the joint production possibility frontier; put rabbit on the horizontal axis, find the coordinates of the kink.

Explanation / Answer

11.

(a) Mutt: 3 Fish = 9 rabbits

Implies 1 Fish = 3 rabbits. This shows that Mutt can either catch 1 Fish or 3 Rabbits. If Mutt consumes 2 Fishes then he can consumer addtitional 3 rabbits if he acts alone.

Jeff: 4 fish = 2 rabbits

If Jeff consumes 2 Fishes then he can also consume 1 rabbit if he acts alone.

(b) To find specialisation, we need to find the opportunity cost of fish and rabbit, those who have less opportunity cost in the catching of fish will have specialization is fish and so on.

Mutt: 3 Fish = 9 rabbits

1 Fish = 3 Rabbits

or 1 Rabbit = 1/3 Fish

Jeff: 4 Fish = 2 Rabbits

1 Fish = 1/2 Rabbit

or 1 Rabbit = 2 Fish

So, Mutt is specialized in the catching of Rabbit while Jeff is specialized in Fish catching.

(c) If both catches in which they have comparative advantage then they are able to catch 9 Rabbits and 4 Fishes which can be divided equally among Mutt and Jeff.

Net gain in the catch of Rabbits = 9 rabbits - 4 rabbits = 5 rabbits

Net gain in Fishes = 4 fishes - 4 fishes = 0

(d) 4 Fishes = 9 Rabbits

1 Fish = 9/4 Rabbits

1 Fish = 2.25 Rabbits

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