Three friends, Giovanni, Luisa, and Maria, run a bakery in Rome. The bakery sells two items, biscotti and cannoli. Each worker works 6 hours per day. While all three can produce both item, they differ in the number of each they can produce in an hour. The following table shows the number of biscotti or cannoli each worker could produce in an hour. Biscotti/Hour Cannoli/Hour Giovanni 80 20 Luisa 30 50 Maria 40 30 a. For each worker, what is the opportunity cost of 1 biscotto (in terms of cannoli)? Of 1 cannolo (in terms of biscotti)? b. Draw the production possibilities curve (PPC), with cannoli on the horizontal axis, for the bakery (for a single day) when there is no specialization—that is, when each worker divides their time between biscotti production and cannoli production in the same way as the other two workers. Identify and explain the vertical intercept, the slope, and the horizontal intercept of the PPC in this case. Why does the PPC without specialization have the shape that it does? c. Draw the PPC for the bakery when the three workers specialize according to comparative advantage. Again, identify and explain the vertical intercept, the slope(s), and the horizontal intercept of the PPC in this case. Also, give the quantities of cannoli and biscotti that correspond to any kinks in the PPC. Why does the PPC with specialization have the shape that it does?

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a The opportunity cost of 1 biscotto for each worker in terms of cannoli is Giovanni 2080 025 cannoli Luisa 5030 167 cannoli Maria 3040 075 cannoli Th... View the full answer