Answer:
The solution to the given problem is done below.
Explanation:
(a) How much peanut butter and jelly will David buy with his $3 allowance in a week?
According to the given problem, David likes 2 ounces of peanut butter for every 1 ounce of jelly,
2Pb = J and the budget constraint is .05pb+.1j = 3.
By using substitution.
David will buy Pb = 30 ounces, J = 15 ounces.
30(0.05) + 15 (0.10) = 3
(b) Suppose the price of jelly were to rise to $0.15 an ounce. How much of each commodity would be bought?
If pj = $0.15,
24(0.05) + 12(0.15) = 3
Substitution now yields J = 12 ounces, Pb = 24 ounces.
Answer: Option (C) is correct.
Explanation:
A country has a comparative advantage in producing a commodity if the opportunity cost of producing that good is lesser in that country as compared to the other country.
From the information given in the question, it is clear that Alphaland has a comparative advantage in axes and Betaville has a comparative advantage in batons.
Hence, Alphaland will trade axes for batons only if the price of batons is lower than the cost of producing it in Alphaland. So that there is a possibility mutually beneficial trade.
Think its the second one but not sure