Below are some possible combinations of rice and fish for people living on the Islands of Alpha and Beta. Suppose the Alphas currently produce and consume 10 pounds of rice and 60 pounds of fish. The Betas currently produce 15 pounds of fish and 25 pounds of rice. Each island can produce any linear combination in between the points of producing only one type of good.

A. What is the opportunity cost of 1 pound of rice on Alpha Island? (Answer with a number and good. For example, "12 bicycles").

B. What is the opportunity cost of 1 pound of rice on Beta Island? (Answer with a number and good. For example, "12 bicycles").

C. Which island has the comparative advantage in rice production?

D. Suppose that the Alphas propose a trade in which they specialize in fish and give the Betas (who would specialize in rice) 15 pounds of fish and receive 10 pounds of rice in return. Would it be rational to agree? Explain why
 

Transcribed Image Text:

Alpha Island Rice Fish Rice Fish (Pounds) (Pounds) (Pounds) (Pounds) 10 40 80 Beta Island 0 0 40 40 0 Alpha Island Rice Fish Rice Fish (Pounds) (Pounds) (Pounds) (Pounds) 10 40 80 Beta Island 0 0 40 40 0

Answer rating: 100% (QA)

Answer Ans A Alpha Island 250 pounds of ... View the full answer