Question

Jack and Jill live under a hill and go out everyday to collect nuts and water. Jack can collect a maximum 18 liters of water or 36 ounces of nuts each day. Jill can collect 28 liters of water or 21 ounces of nuts per day. Currently, Jack and Jill each spend half of their collecting nuts and the other half collecting water

1.Calculate the opportunity costs of nuts and water for both Jack and Jill (you will get 4 opportunity costs).
2.Explain who should specialize in collecting which item.
3.If they specialize, how much more water total do they collect compared to when they were each spending half the day collecting water?
4.If they collect 20 liters of water and 26 ounces of nuts, are they producing an efficient combination?

Answer 1

Given the output of Jack and Jill.

	Water	Nuts
Jack	18	36
Jill	28	21

Calculating opportunity cost

	1 ltr of Water	1 ounce of Nut
Jack	2 ounces of Nut	0.5 Ltr of water
Jill	0.75 ounces of Nut	1.33 ltr of water

Note: For Jill 28 ltr of water or, 21 ounces of nut are equivalent.

21 ltr of water = 28 ounce of nut

1 ltr of water = 21/28 = 3/4 = 0.75 ounce of nut

Or, 1 ounce of nut = 28/21 = 1.33 ltrnof water

Similarly we can calculate for Jack..

2. From the opportunity cost table we can see the opportunity cost to collect nut is less for Jack. Therefore, Jack has comparative advantage in collection of Nuts.

Similarly, in case of water Jill has less opportunity cost therefore, Jill has comparative advantage in collection of water.

Jack should specialize in collection of Nuts.

Jill should specialize in collection of Water.

3. When both used to devote 50% of their time in collecting water and remaining time in collecting nuts. Then the total output was

	Water	Nuts
Jack	9	18
Jill	14	10.5
Total	23	28.5

Now, calculating the output after specialization

	Water	Nuts
Jack	0	36
Jill	28	0
Total	28	36

Increase in water = 28 - 23 = 5 liters

Increase in nuts = 36 - 28.5 = 7.5 ounces.

4. From the above table we can see the output of the two persons is 28 liters of water and 36 ounces of nuts.

In this case the output mentioned is 20 liters of water and 26 ounces of nuts. It is less than the output after specialization. Hence, it is inefficient.

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