How trade creates value $($Chapter $2)$

Max Daily Production



Steaks Shrimp $($lbs$.)$

Fry Daddy $50200$

Grill Master $4080$

Refer to the above production data table for Fry Daddy and Grill Master. The Max Daily Production shows the quantity of Steaks OR pounds of Shrimp that each could produce in a day. For example, Fry Daddy could produce either $50$ steaks OR $200$ pounds of shrimp or any combination using the $1$:$4$ ratio.

$1.$ Draw the Production Possibilities Frontier for each company. $(5$ points$)$

$2.$ What is the opportunity cost for Grill Master to produce one steak? $(5$ points$)$

$3.$ What is the opportunity cost for Fry Daddy to produce one steak? $(5$ points$)$

$4.$ Who has the comparative advantage for producing steaks? $(5$ points$)$

$5.$ Assume they see the advantages of specialization and decide to trade. How many total steaks and pounds of shrimp would be produced? $\_\_\_\_\_\_\_$ steaks and $\_\_\_\_\_\_\_$ pounds of shrimp $(4$ points$)$

$6.$ What are the terms of fair trade? $\_\_\_\_\_$ pounds of shrimp for one steak $(3$ points$)$