Calzonia and Pizzaland both make calzones and pizza, but Pizzaland chefs are less proficient than Calzonian chefs

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Calzonia and Pizzaland both make calzones and pizza, but Pizzaland chefs are less proficient than Calzonian chefs in the doughfolding process that converts pizza ingredients into calzones. Workers in Calzonia can make at most 10 calzones per hour, and at every level of production the opportunity cost of one calzone is one pizza. Workers in Pizzaland can make at most 12 calzones per hour, and every time they decrease calzone production by 1, they can make 1.5 additional pizzas.

a. Draw graphs of the PPFs for Calzonia and Pizzaland with the quantity of pizzas measured on the vertical axis.

b. If Calzonia trades calzones for pizzas from Pizzaland, what is the range of prices, in terms of pizzas per calzone, that would make both countries better off from trade?

c. Suppose that Pizzaland makes only pizza, Calzonia makes only calzones, and the terms of trade are 1.25 pizzas from Pizzaland for each calzone from Calzonia. On the graph for part a, draw the consumption possibilities frontiers for Calzonia and Pizzaland and label the CPFC and CPFP.

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Survey Of Economics

ISBN: 9781429259569

1st Edition

Authors: David A. Anderson

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