most of their time studying of course but they leave some ti

most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Pat takes 4 hours to brew a gallon of root beer and 2 hours to make a pizza. Kris takes 6 hours to brew a gallon of root beer of root beer, and Kris\'s opportunity cost of making a pizza is Y of The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates ? of root beer, and the lowest price that makes both roommates better off is

Solution

Pat takes 4 hours to brew a gallon of root beer and 2 hours to make a unit of pizza.

So in one hour he will be able to either brew 1/4 gallons of beer or 1/2 units of pizza. If he makes one pizza, he will be giving up on brewing (1/4)×2 gallons of beer that is, 1/2 gallons of root beer.

So the opportunity cost of part of producing one unit of Pizza is half gallons of root beer.

Similarly we calculate the other opportunity cost and opportunity cost table will look like :

Now, since to produce 1 unit of Pizza that has to give up 1/2 gallons of root beer while Chris has to give up 2/3 gallons of root beer, pat has to give up lesser gallons of root beer compared to Kris to produce 1 unit of pizza, so pat has a comparative advantage in producing pizza.

Also, We know from the question that :

We see that pat can make a pizza in 2 hours Kris takes 4 hours, so pat has an absolute advantage in making pizza as he can make the same number of pizza in less time than kris.

Since Pat has a comparative advantage introducing Pizza, he will produce only Pizza while Chris will produce only root beer. And if they are allowed to trade, pat will trade away pizza in exchange for root beer.

The price of trade must lie between the two opportunity cost to make both the parties better off.

So they should exchange one unit of pizza for a lowest price of 1/2 gallons of beer and a highest price of 2/3 gallons of bed

	Opportunity cost of producing 1 unit of pizza	opportunity cost of brewing 1 gallons of root beer
Pat	1/2 gallons of root beer	2 units of pizza
Kris	2/3 gallons of root beer	3/2 units of pizza