In the ancient country of Roma, only two goods, spaghetti and meatballs, are produced. There are two tribes in Roma, the Tivoli and the Frivoli. By themselves, the Tivoli each month can produce either 30 pounds of spaghetti and no meatballs, or 50 pounds of meatballs and no spaghetti, or any combination in between. The Frivoli, by themselves, each month can produce 40 pounds of spaghetti and no meatballs, or 30 pounds of meatballs and no spaghetti, or any combination in between.
a. Assume that all production possibilities curves are straight lines.
Economics - Financial Markets
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Assume that all production possibilities curves are straight lines. Draw one diagram showing the monthly production possibilities curve for the Tivoli and another showing the monthly production possibilities curve for the Frivoli.
b. Which tribe has the comparative advantage in spaghetti production? In meatball production?
In A.D. 100, the Frivoli discovered a new technique for making meatballs that doubled the quantity of meatballs they could produce each month.
c. Draw the new monthly production possibilities curve for the Frivoli.
d. After the innovation, which tribe had an absolute advantage in producing meatballs? In producing spaghetti? Which had the comparative advantage in meatball production? In spaghetti production?