Alpha and Beta, two tiny islands off the east coast of Tricoli, produce pearls and pineapples. The
Question:
(a) Graph the production possibilities confronting each island.
(b) What is the opportunity cost of pineapples on each island (before trade)?
Alpha: __________
Beta: __________
(c) Which island has a comparative advantage in pearl production?
(d) Graph the consumption possibilities of each island with free trade.
(e) If Beta produced only pearls,
(i) How many could it produce?
(ii) How many pearls would it have to export to get 20 pineapples in return?
(iii) What is the net gain to Beta in this case?
Opportunity CostOpportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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a b Alpha 04 pearls Beta 25 pearls c Beta d e i 50 pearls ii 8 pearls minimum iii Approximately 17 pineapples Feedback a To graph the production possibilities curves for both islands graph the coordin...View the full answer
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Related Book For 
The Macro Economy Today
ISBN: 978-1259291821
14th edition
Authors: Bradley R. Schiller, Karen Gebhardt
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