Iron Crafters Inc, a hardware manufacturing company, has employed experts to carefully analyze its operating unit, to identify p
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Answer: Total earning is $96 for both Susan and Tom
Explanation:
Susan can pick 4 pounds of coffee or 2 pounds of nuts.
Tom can pick 2 pounds of coffee or 4 pounds of nuts.
Price of Coffee = $2 per pound
Price of Nuts = $2 per pound
Opportunity cost of producing coffee for Susan = 2/4 = 0.5
Opportunity cost of producing coffee for Tom = 4/2 = 2
Opportunity cost of coffee is low for Susan, so she has a comparative advantage in it.
So, Susan produces 6*4 = 24 pounds of coffee, total revenue from sale of coffee is $24*2 = $48
Opportunity cost of producing Nuts for Susan = 4/2 = 2
Opportunity cost of producing Nuts for Tom = 2/4 = 0.5
Opportunity cost of coffee is low for Tom, so he has a comparative advantage in it.
So, Tom produces 6*4 = 24 pounds of nuts, total revenue from sale of nuts is $24*2 = $48
So,