Question

Alexi and Tony own a food truck together that serves only two​items, street tacos and Cuban sandwiches. Some customers purchase both goods​ together; therefore, they will always produce both goods.

Alexi and Tony can sell all the street tacos and Cuban sandwiches that they are able to​ produce, and will split the revenue equally.

Output Per Hour

StreetTacos

Cuban Sandwiches

Alexi 30 50
Tony 80 40
Alexi's opportunity cost of producing one taco is __Cuban sandwiches.

​(Round your response to two decimal places.​)

​Tony's opportunity cost of producing one taco is __ Cuban sandwiches.

​(Round your response to two decimalplaces.​

___ has a comparative advantage in the production of Cuban sandwiches.

___ has a comparative advantage in the production of street tacos.

Assume that Alexi works 20 hours per week in the business.

Further assume that Alexi devoted half of his time​ (10 of the 20​ hours) to making street tacos and half of his time to making Cuban sandwiches.

​1.) Using the line drawing​ tool, graph the possible combinations of street tacos and Cuban sandwiches that he could produce in a week. Label the line

​'PPFAlexi​'.

​2.) Using the point drawing​ tool, indicate how many of each good he actually produces in a week given the amount of time spent on each. Label the point​ 'A'.

Carefully follow the instructions above and only draw the required objects.

Suppose that Alexi spent all 20 hours of his time on street tacos and Tony spent 17 hours on Cuban sandwiches and 3 hours on street tacos.

Combined they would produce a total of___ tacos and ___Cuban sandwiches.

Suppose that Alexi and Tony can sell all their street tacos for $3.50 each and all their Cuban sandwiches for ​$3.50 each.

Suppose each of them works 20 hours per week and they decide to completely specialize. That​ is, Alexi will spend all 20 hours on production of one​ good, and Tony will spend all 20 hours on production of the other good.

How will they spend their​ time?

Tony spend__hours on the production of street tacos.

Alexi will spend___ hours on the production of Cuban sandwiches.

Tonywill specialize in street taco production and earn $___Alexi will specialize in Cuban sandwich production and earn ​$___.

Their maximum joint revenue is $___per week.

PLEASE SHOW HOW YOU GET YOU ANSWER. THANK YOU!

Answer 1

Alexi's opportunity cost of producing one taco is 0.6 Cuban sandwiches. Tony's opportunity cost of producing one taco is 0.5 Cuban sandwiches. Tony has a comparative advantage in the production of Cuban sandwiches. Alexi has a comparative advantage in the production of street tacos. The possible combinations of street tacos and Cuban sandwiches that Alexi could produce in a week can be graphed on a Production Possibility Frontier (PPF). Based on Alexi's allocation of time, he produces 10 street tacos and 10 Cuban sandwiches in a week.

Step-by-step explanation:

Alexi's opportunity cost of producing one taco is 0.6 Cuban sandwiches.

Tony's opportunity cost of producing one taco is 0.5 Cuban sandwiches.

Tony has a comparative advantage in the production of Cuban sandwiches.

Alexi has a comparative advantage in the production of street tacos.

To graph the possible combinations of street tacos and Cuban sandwiches that Alexi could produce in a week, we will use the data provided. We plot the points (0,50) and (30,0) on the graph and draw a line connecting them. This line represents the Production Possibility Frontier (PPF) for Alexi.

Based on Alexi's allocation of time, he produces 10 street tacos and 10 Cuban sandwiches in a week. We plot this point on the graph and label it as 'A'.

If Alexi spends all 20 hours of his time on street tacos and Tony spends 17 hours on Cuban sandwiches and 3 hours on street tacos, they would produce a total of 510 tacos and 150 Cuban sandwiches.

If Alexi spends all 20 hours on the production of street tacos and Tony spends all 20 hours on the production of Cuban sandwiches, Tony will spend 20 hours on the production of street tacos and Alexi will spend 20 hours on the production of Cuban sandwiches. Tony will specialize in street taco production and earn $70, while Alexi will specialize in Cuban sandwich production and earn $70.

Their maximum joint revenue is $140 per week.

Answer 2

Alexi spends more time in the production of tacos and Tony spends more time in the production of Cuban sandwiches. So they enjoy comparative advantage in the production of these goods respectively.

Answer: Alexi earns $4200 and Tony earns $6300. Collectively they earn $10500 per week.

Step-by-step explanation:

The opportunity cost of Alexi for producing one Taco is 0.67 cuban sandwiches.

The opportunity cost of Tony for producing one cuban sandwich is 1.29 tacos.

Tony has a comparative advantage in the production of cuban sandwiches.

Alexi has a comparative advantage in the production of street tacos.

Combined together they will produce a total of 1410 tacos and 1530 cuban sandwiches.

Alexi will spend 20 hours in the production of tacos and Tony will spend 20 hours in the production of cuban sandwiches.

Tony will specialize in cuban sandwiches and will earn $ 6300 and Alexi will specialise in producing tacos and will earn $ 4200.

Their joint revenue will be $10500 per week.