Dr. Shishkin
ECON 2106
Assignment #3
Fall 2010
ANSWERS
Production possibility frontiers for Jim and Sam
(number of fish and rabbits that Jim and Sam can catch per week)
1. Who has the absolute advantage in catching fish and who in catching rabbits? Explain
your answer.
Jim has absolute advantage in catching rabbits because he can catch 80 per week, which
is more than 10 rabbits that Sam can catch per week.
Sam has absolute advantage in catching fish because he can catch 60 fish per week,
which is more than 20 fish that Jim can catch.
2. Fill in the following table showing the opportunity cost that Jim and Sam are facing
when increasing their production of fish or rabbits by one unit.
O.C. of one rabbit
O.C. of one fish
Jim
20/80=1/4
80/20=4
Sam
60/10=6
10/60=1/6
3. Who has the comparative advantage in producing fish and who in producing game?
Use the table above to answer this question. Explain your answer.
According to the table above, Sam has comparative advantage in fishing because he has
smallest opportunity cost for that activity (he has to give up 1/6 of rabbit to get one extra
fish, while Jim has to give up 4 rabbit to get one extra fish).
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Dr. Shishkin
ECON 2106
Fall 2010
Jim has comparative advantage in catching rabbits because his opportunity cost is the
smallest and he has to give up only ¼ of a rabbit to get one extra fish, while Sam has to
give up 6 fish to get one extra rabbit.
4. Suppose that Jim and Sam decided to specialize and trade. Use the table below to
answer the following questions.
W/o trade
Production
1
2
Rabbits
Fish
Rabbits
Sam
Fish
Jim
With trade
Production
3
40
10
5
30
Gains from
Consumption Trade
4
80
0
0
60
5
50
30
30
30
6
10
20
25
0
5. Show on the graphs above the points that indicate consumption of fish and rabbits for
Jim and Sam without trade, using numbers from column 4. (Answer: see the graph).
6. Who should catch fish and who should catch rabbits if Jim and Sam decide to
specialize and trade? Fill in appropriate cells in column 4. Jim should catch rabbits
because he has comparative advantage in catching rabbits, and Sam should catch fish
because he has comparative advantage in catching fish.
7. Fill in the cells that indicate Jim’s and Sam’s consumption (column 6), making sure
that you satisfy the following conditions:
 Total consumption of fish by Jim and Sam is equal to its production.
 Total consumption of rabbits by Jim and Sam is equal to their production.
 After trade, Jim and Sam consume at least as much of fish and rabbits as they
consumed without trade (column 4). (Answer: see the table.)
8. Calculate gains from trade for Jim and Sam as the difference between their
consumption with and without trade for each good. Make sure that these numbers are
positive. Put them in column (6). (Answer: see the table.)
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