Question

Steve and Craig have been shipwrecked on a deserted island in the South Pacific. Their economic activity consists of either gathering pineapples or fishing. We know Steve can catch four fish in one hour or harvest two baskets of pineapples. In the same time Craig can reel in two fish or harvest two baskets of pineapples.

Does Steve or Craig have an absolute advantage in producing fish? ____________.
Which of the two persons, Steve or Craig, has a comparative advantage in producing pineapples? _______________.
If both persons only caught fish, how many fish total could they collect in eight hours?______________
If both persons only collected pineapples, how many baskets total could they collect in eight hours? _________________
What is the most number of fish they could . catch if both worked eight hours, assuming they want to collect exactly four baskets of pineapples per day? ______________

Answer 1

Steve

Craig

48

32

42 hours

Step-by-step explanation:

A person has comparative advantage in production if it produces at a lower opportunity cost when compared to other people.

Opportunity cost of Steve in catching pineapples = 4/2 = 2

Opportunity cost of Craig in catching pineapples = 2/2 = 1

Craig has a lower opportunity cost in picking pineapple and he has a comparative advantage

A person has absolute advantage in the production of a good or service if it produces more quantity of a good when compared to other people

Steve can catch 4 fish and Craig can catch 2 fish. Steve catches more fish and has an absolute advantage

If they both caught only fish, Steve would catch 4 fishes in an hour and Craig would pick 2 pineapples in an hour

In 8 hours = (4 x 8) + (2 x 8) = 48

If they both worked 8 hours and wanted to collect exactly four baskets of pineapples per day, they would collect 4 pineapples in 1 hour

That leaves 7 hours

(4 x 7) + (2 x 7) = 42