Farmer Frank lives on 100 acres on a rural farm where he raises chickens (which produce eggs) and grows tomatoes. Eggs and tomatoes are the only two goods that Frank consumes. This year, Frank's chickens will yield 100 eggs and 10 pounds of tomatoes, respectively.

(a) If Frank were not able to trade his endowment of tomatoes and eggs, but he can freely dispose of goods, what would his set of feasible consumption bundles look like? Show it on a graph.

(b) Suppose Frank could go to the Coventry Farmers' Market and buy or sell eggs for $0.10 each, while tomatoes could be bought or sold for $1.50 a pound. If Frank used all of his resources to buy tomatoes, how many pounds of tomatoes could he consume? If he used all of his resources to buy eggs, how many eggs could he eat? Draw Frank's new set of feasible consumption bundles.

(c) Suppose Frank's next door neighbor, Farmer Fran, who also raises chickens, gives Frank a gift of 50 eggs for Christmas. Frank would not consider selling Frank's gift at the Farmer's market; to do so would be rude. What does Frank's feasible set of consumption bundles look like after receiving this gift?

Answer rating: 100% (QA)

Farmer Franks Feasible Consumption Bundles a Selfsufficient Frank Without trade Frank can only consu... View the full answer