Question

lyssa and Crystal are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Alyssa takes 3 hours to brew a gallon of root beer and 2 hours to make a pizza. Crystal takes 7 hours to brew a gallon of root beer and 5 hours to make a pizza. Alyssa's opportunity cost of brewing a gallon of root beer is__________ , and Crystal's opportunity cost of brewing a gallon of root beer is__________ , has an absolute advantage in brewing root beer, and has a comparative advantage in brewing root beer. If Alyssa and Crystal trade foods with each other, will trade away pizza in exchange for root beer. The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates better off is of root beer, and the lowest price that makes both roommates better off is of root beer per pizza.

Answer 1

Answer:

a. 1.5 pizza

b. 1.39 pizza

c. Alyssa has an absolute advantage in brewing beer

d. Crystal has a comparative advantage in brewing beer

e. Crystal will easily trade away pizza for root beer

f.  there's no limit to the highest price

g. lowest price is 0.719 beer root/pizza

Explanation:

Alyssa takes 3 hrs to brew a gallon of root beers and 2 hrs to make a pizza

Crystal takes 7 hrs to brew a gallon of root beer and 5 hrs to make a pizza

Alyssa make 1 gallon/3 hrs = 0.33 gallons/hr of beer, and the same way makes 0.5 pizza/hr

Crystal makes 0.143 gallon/hr of beer, and 0.2 pizza/hr

for Alyssa, 0.33 gallons/hr = 0.5 pizza/hr, therefore

1 gallon of beer = 0.5/0.33 = 1.51 pizza

for crystal, 1 gallon of beer = 0.2/0.143 = 1.39 pizza

price of pizza:

Alyssa = 0.662 root beer/pizza

Crystal = 0.719 root beer/pizza