Question

2. Comparative and absolute advantage

Paolo and Sharon are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of barley and alfalfa each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing barley or alfalfa or to produce barley on some of the land and alfalfa on the rest.

	Barley (Bushels per acre)	Alfalfa (Bushels per acre)
Paolo	30	10
Sharon	28	7

On the following graph, use the blue line (circle symbol) to plot Paolo's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Sharon's PPF.

Answer 1

No. of acres of land = 20

For Paolo, the total amount of barley to be produced = 30*20 = 600 bushels

For Paolo, the total amount of alfalfa to be produced = 10*20 = 200 bushels

For Sharon, the total amount of barley to be produced = 28*20 = 560 bushels

For Sharon, the total amount of alfalfa to be produced = 7*20 = 140 bushels

So, the PPF curve is as follows:

200 180 Paolo's PPF 160 140 120 Sharon's PPF 100 80 60 40 20 0 100 200 300 400 500 600 700 800 900 1000 BARLEY (Bushels)

Here, each axis represents the product to be produced using all resources. Here, all resources are the 20 acres of land. So, for Paolo, the maximum amount of barley to be produced is 600 bushel if all 20 acres of land is used and maximum amount of alfalfa is 20 bushels if all 20 acres are used to produce alfalfa. Afterwards, the points of maximum production is connected.

On a similar note, Sharon’s PPF curve is created.