Question

1. Given the choice to either go to work or sleep in, you choose to sleep in. What is the opportunity cost of this choice? a. The cost of your bed, sheets, pillow and rent b. The wages you would have earned if you’d gone to work c. The homework you did yesterday d. Both going to work and sleeping in.

2. Who has the Absolute Advantage in producing chairs and tables? Who has the comparative advantage in producing? You may want to calculate the opportunity cost for Milo and Jenna to determine Comparative Advantage

	Making a Table	Making a Chair
Jenna	2 hours	4 hours
Milo	4 hours	6 hours

Answer 1

Opportunity cost refers to the cost of forgoing one alternative for the other.

1.Given the choice to either go to work or sleep in , when you choose to sleep in. The opportunity cost of this choice is:

a)The cost of your bed sheets pillow and rent :( this is wrong and it is not one of the options)

b)The wages you would have earned if you had gone to work ( This is right as if one had gone to work instead of sleeping he would have earned his wages)

c) The homework you did yesterday (this is wrong as it is not one of the alternatives given )

d) Both going to work and sleeping in ( this is wrong as we cannot select both the options at the same time)

2) Absolute advantage is the ability of an individual or  company or country to produce more quantity of a goods or services with the given quantity of inputs per unit of time, or to produce the same quantity of a good or service per unit of time using a lesser quantity of inputs, than the other entity that produces them.

As it is evident that Milo is producing tables in 4 hr and chairs in 6 hrs he is taking more time over Jenna who is producing the same in lesser time that is 2 hrs and 4 hrs respectively.Thus Jenna has absolute advantage.

Opportunity cost= What one sacrifices / what one gains

Opportunity cost for Jenna = making table / making chair = 2/4 = 0.5

Opprtunity cost for Milo = Making table / making chair =4/6=0.67

The Comparative advantage is said to be an individual or economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners.Thus here we can say that Jenna has lower opportunity cost thus he has Comparative advantage over Milo in production.( 0.5 < 0.67)