What is the result when Robinson Crusoe and Friday specialize and then trade? Specialization reduces their overall consumption. Robinson consumes more, and Friday consumes less. Both of them can consume more than they could produce individually. They end up with the same consumption as before.
Added by Sarah S.
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Step 1: With comparative advantage, each person specializes in the good they produce relatively more efficiently, increasing total production. Show more…
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Suppose that Robinson Crusoe produces and consumes fish $(F)$ and coconuts $(C) .$ Assume that during a certain period he has decided to work 200 hours and is indifferent as to whether he spends this time fishing or gathering coconuts. Robinson's production for fish is given by $$F=\sqrt{L_{F}}$$ and for coconuts by $$\boldsymbol{C}=\sqrt{\boldsymbol{L}_{c}}$$ where $L_{F}$ and $L_{c}$ are the number of hours spent fishing or gathering coconuts. Consequently, $$\boldsymbol{L}_{c}+\boldsymbol{L}_{F}=200$$ Robinson Crusoe's utility for fish and coconuts is given by $$\text { utility }=\sqrt{\boldsymbol{F} \cdot \boldsymbol{C}}$$ a. If Robinson cannot trade with the rest of the world, how will he choose to allocate his labor? What will the optimal levels of $F$ and $C$ be? What will his utility be? What will be the $R P T$ (of fish for coconuts)? b. Suppose now that trade is opened and Robinson can trade fish and coconuts at a price ratio of $P_{F} / P_{C}=2 / 1 .$ If Robinson continues to produce the quantities of $F$ and $C$ in part (a), what will he choose to consume, given the opportunity to trade? What will his new level of utility be? c. How would your answer to part (b) change if Robinson adjusts his production to take advantage of the world prices? d. Graph your results for parts (a), (b), and (c).
Supreeta N.
Draw an example of a production possibilities frontier for Robinson Crusoe, a shipwrecked sailor who spends his time gathering coconuts and catching fish. Does this frontier limit Crusoe's consumption of coconuts and fish if he lives by himself? Does he face the same limits if he can trade with natives on the island?
Andrew D.
Exchange in an island economy. Robin and Terry are stranded on a deserted island and consume two products: coconuts and fish. In a day, Robin can catch 2 fish or gather 10 coconuts, and Terry can catch 1 fish or gather 1 coconut. Output per day: Robin: Fish - 2 Coconuts - 10 Terry: Fish - 1 Coconuts - 1 Terry has a comparative advantage in fishing and Robin has a comparative advantage in coconuts. Please explain how come? Suppose that each person is initially self-sufficient. In a six-day week, Robin produces and consumes 40 coconuts and 4 fish, and Terry produces and consumes 4 coconuts and 2 fish. Now suppose Robin and Terry consume the same number of fish as in the self-sufficient outcome, then specialization and exchange allow Robin to consume additional coconuts and Terry consumes additional coconuts. Please explain why is comparative and how did you find the answers step by step explanations. Thanks :)
Azat N.
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