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In the top three graphs Tom, Penelope and
Nicole are living separate lives on the beach. They all follow the
dietary rule Pineapples = 2.5 Fish. You should be able to calculate
how much of each good they each produce and eat. The results are:
Tom (F=1.71, P=4.27), Penelope (F=2 2/3, P=6 2/3), Nicole (F=2, P=5).
Their total output is F=6.37, P=15.93 |
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After Adam Smith appears to Nicole in her dreams she
convinces the others that there are gains to specialization and working
together. The result is the graph to the left. They still
follow the same dietary rule. You should be able to calculate their
aggregate production and consumption. In total they harvest F=8,
P=20. |
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One day Captain Jack Sparrow is seen to have anchored the
Black Pearl in the lagoon. He offers to trade 3 pineapples for 2
fish. The terms of trade from different production decisions made by
the three castaways are shown by the red lines. You should be able
to determine the trio's production decision and the new consumption bundle
to which they will trade. After producing F=18 and P=12, they sell some
fish to Captain Jack Sparrow in exchange for Pineapple. In fact,
they trade to the intersection of the teal diet line and the solid red
trade line.They end up with F=9.75 and P=24.375. |
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