Answered step-by-stepHilary and Maria are roommates. They spend most of their time...
Hilary and Maria are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Hilary takes 4 hours to brew a gallon of root beer and 2 hours to make a pizza. Maria takes 6 hours to brew a gallon of root beer and 4 hours to make a pizza.
Hilary's opportunity cost of brewing a gallon of root beer is , and Maria's opportunity cost of brewing a gallon of root beer is .
has an absolute advantage in brewing root beer, and has a comparative advantage in brewing root beer.
If Hilary and Maria trade foods with each other, will trade away pizza in exchange for root beer.
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 better off is of root beer, and the lowest price that makes both roommates better off is of root beer per pizza.
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