Robinson Crusoe can bake 10 loaves of bread (B) in one hour or peel 20 potatoes (P). Friday can bake 5 loaves of bread (B) in an hour or peel 30 potatoes (P). Draw PPF of each individual. What is the opportunity cost of producing 1 unit of bread and I unit of potato by Robison Crusoe and Friday? Show autarky point on PPF if production and consumption before trade is (5B, 10P) for Robinson Crusoe and (10/3B and 10P) for Friday. If perfect competition prevails (Price = marginal cost determine the price of each unit of bread and potato. also determine comparative advantage Robinson Crusoe and Friday. Would it be a complete specialization? Suppose commodities ca exchange between two individuals at 1B for 5P (IB = 5P) and each individual want to consume least 10 units of potatoes then determine gains from trade (a movement from autarky consumption trade consumption) of each individual.
