Question Mary and Jason are a new couple trying to understand their family production plans. Suppose they conduct two types of production: household production (HP) and market production (MP). If Mary carries out household production, her production value is equivalent to $20 each hour. If she does market production, she gets paid $15 each hour. Jason's production value is $12 per hour if he does household production. If he does market production, he gets paid $25 per hour. Assume Mary and Jason each work 8 hours on a typical workday. a) Calculate and depict Mary and Jason's daily production possibilities. b) Assume Mary and Jason conduct market production, only. Calculate and depict the family production possibility. If they wish to keep some household production, who shall do it, and what will be the new production possibility? Show it in a graph. c) Alternatively, if Mary and Jason conduct household production only, what would be the family production possibility? If they wish to keep some market production, who should do it, and what will be the new production possibility? Show it in a graph. d) If Mary and Jason pool their resources (time) and split the time equally between household production and market production, what would be the family production possibilities? Show them in a graph. e) Is there a gain for Mary and Jason to collaborate? If so, show it in a diagram. f) Briefly discuss two potential disadvantages of specialization and exchange. g) Suppose despite their specialization, Mary prefers household production and Jason prefers market work. Construct a proper diagram to describe Mary and Jason's general work preferences and explain why.
Question Mary and Jason are a new couple trying to understand their family production plans. Suppose they conduct two types of production: household production (HP) and market production (MP). If Mary carries out household production, her production value is equivalent to $20 each hour. If she does market production, she gets paid $15 each hour. Jason's production value is $12 per hour if he does household production. If he does market production, he gets paid $25 per hour. Assume Mary and Jason each work 8 hours on a typical workday. a) Calculate and depict Mary and Jason's daily production possibilities. b) Assume Mary and Jason conduct market production, only. Calculate and depict the family production possibility. If they wish to keep some household production, who shall do it, and what will be the new production possibility? Show it in a graph. c) Alternatively, if Mary and Jason conduct household production only, what would be the family production possibility? If they wish to keep some market production, who should do it, and what will be the new production possibility? Show it in a graph. d) If Mary and Jason pool their resources (time) and split the time equally between household production and market production, what would be the family production possibilities? Show them in a graph. e) Is there a gain for Mary and Jason to collaborate? If so, show it in a diagram. f) Briefly discuss two potential disadvantages of specialization and exchange. g) Suppose despite their specialization, Mary prefers household production and Jason prefers market work. Construct a proper diagram to describe Mary and Jason's general work preferences and explain why.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter16: Bargaining
Section: Chapter Questions
Problem 8MC
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Transcribed Image Text:Question Mary and Jason are a new couple trying to understand their family production plans.
Suppose they conduct two types of production: household production (HP) and market production
(MP). If Mary carries out household production, her production value is equivalent to $20 each
hour. If she does market production, she gets paid $15 each hour. Jason's production value is $12
per hour if he does household production. If he does market production, he gets paid $25 per hour.
Assume Mary and Jason each work 8 hours on a typical workday.
a) Calculate and depict Mary and Jason's daily production possibilities.
b) Assume Mary and Jason conduct market production, only. Calculate and depict the family
production possibility. If they wish to keep some household production, who shall do it,
and what will be the new production possibility? Show it in a graph.
c) Alternatively, if Mary and Jason conduct household production only, what would be the
family production possibility? If they wish to keep some market production, who should
do it, and what will be the new production possibility? Show it in a graph.
d) If Mary and Jason pool their resources (time) and split the time equally between household
production and market production, what would be the family production possibilities?
Show them in a graph.
e) Is there a gain for Mary and Jason to collaborate? If so, show it in a diagram.
f) Briefly discuss two potential disadvantages of specialization and exchange.
g) Suppose despite their specialization, Mary prefers household production and Jason prefers
market work. Construct a proper diagram to describe Mary and Jason's general work
preferences and explain why.
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