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Author Question: Tom is stranded on a deserted island where he can only consume coconuts and crabs. Two of his ... (Read 99 times)

folubunmi

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on: Jun 29, 2018
Tom is stranded on a deserted island where he can only consume coconuts and crabs. Two of his indifference curves are in the figure above.
 
  a) Would Tom prefer his consumption to be at point a or at point b? At point b or at point c? Explain your answers.
  b) Between points a and b, what is Tom's marginal rate of substitution for a crab?

Question 2

Explain the difference between absolute advantage and comparative advantage.
 
  What will be an ideal response?


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todom5090

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Reply #1 on: Jun 29, 2018
Answer to Question 1

a) Tom is indifferent between consuming at point a or at point b because both points are on the same indifference curve, I1. Tom would prefer to consume at point c rather than point b because point c is on a higher indifference curve, I2 versus I1.
b) Between points a and b, Tom's marginal rate of substitution for a crab is 2 coconuts per crab.

Answer to Question 2

A person has an absolute advantage in the production of a good if he or she is more productive at producing the good. A person has a comparative advantage in the production of a good if he or she can produce it at the lowest opportunity cost.


folubunmi

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Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

kthug

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

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