Suppose that two people, Mary and John each live alone in an isolated region. They each have the same resources available, and they grow corn and raise pigs. If Mary devotes all her resources to grow ...
To compare the productivity of Mary and John, we need to look at the ratio of corn to pigs produced by each person. Let's analyze step by step how to calculate this ratio:
Step 1: Determine the opportunity cost
Opportunity cost refers to the value of the next best alternative given up when making a choice. In this situation, opportunity cost is represented by the ratio of resource allocation between corn and pigs. Since both Mary and John have the same resources available, according to the scenario, we assume that they have to trade-off between corn and pigs. If Mary allocates all her resources to growing corn, her opportunity cost is the number of pigs she could have raised instead.
Step 2: Calculate the opportunity cost for Mary
Let's say Mary initially grew x amount of corn. Her opportunity cost is the pigs she could have raised with those resources. Suppose she could have raised y number of pigs using the same resources. At this point, we don't know the exact values of x and y, but we can compare them using a ratio.
Step 3: Compare the opportunity cost ratios of Mary and John
Since Mary allocated all her resources to growing corn, her opportunity cost ratio is 0 corn to y pigs. On the other hand, John allocated half his resources to growing corn and the other half to raising pigs. If he can grow a total of a units of corn and raise b number of pigs, his opportunity cost ratio is a corn to b pigs.
Step 4: Determine the more efficient producer
To compare the productivity of Mary and John, we need to evaluate their opportunity cost ratios. If Mary's ratio of 0 corn to y pigs is greater than John's ratio of a corn to b pigs, it means that Mary can produce pigs at a lower opportunity cost compared to John. This indicates that Mary is more efficient at pig production.