Assume you can produce 6 fish per hour or 5 baskets of berries per hour, and...

Assume you can produce 6 fish per hour or 5 baskets of berries per hour, and your neighbor can produce 5 fish per hour or 1 basket of berries per hour.

1) •Who has the absolute advantage in catching fish? In picking berries? How did you determine your answer?

2) •What is your opportunity cost of another fish?

3) •What is your neighbor’s opportunity cost of another fish?

4)•Who has a comparative advantage in catching fish?

5)•What is your opportunity cost of another basket of berries?

6)•What is your neighbor’s opportunity cost of another basket of berries?

7)•Who has a comparative advantage in gathering berries?

Solutions

Expert Solution

1)To produce 1 fish i need 10 mins and to produce 1 basket i need 12 mins. And my neighbour to produce 1 fish needs 12 mins and 1 basket 1 hour.

the time needed to produce 1 fish and 1basket by me is less than my neighbour. So i have absolute advantage in both fish and berries.

2) opportunity cost of 6 fish is 5 baskets of berries. so the opportunity cost of another fish is 5/6 basket of berries.

3) neighbour's opportunity of 5 fish is 1 basket of berries. so the opportunity cost of another fish is 1/5 basket of berries.

4) opportunity cost of 1 fish of my neighbour(1/5) is less than my opportunity cost(5/6). So my neighbour has comparative advantage in catching fish

5) my opportunity cost of 5 baskets is 6 fish. so the opportunity cost of another basket of berries is 6/5 fish

6) neighbour's opportunity cost of 1 basket of berries is 5 fish. so the opportunity cost of another basket if 5 fish.

7) my opportunity cost of 1 basket is less than the neighbour's opprtunity cost. so i have comparative advantage in gathering berries

Rahul Sunny answered 1 year ago

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