Suppose that Paulie and Vinny each can produce ice cream or t-shirts. it shows the quantity of each good that Paulie and Vinny each can produce in one hour, respectively, if they devote all of their time and effort into making the good.
paulie can make 3 ice cream (cups)
paulie can make 18 t-shirts (quantity)
vinny can make 10 ice cream (cups)
vinny can make 11 t-shirts (quantity)
1. What is Paulie's opportunity cost of producing a cup of ice cream? (Round to two decimal places.)
2. What is Vinny's opportunity cost of producing a t-shirt? (Round to two decimal places.)
3. Paulie has a comparative advantage in _____ and Vinny has a comparative advantage in ____.
a.ice cream; t-shirts
b. t-shirts; ice cream
c.t-shirts; nothing
d.nothing; t-shirts
I found out a few answers myself
1. 6
2. ?
3. b
To find the opportunity cost, we need to determine the trade-off between two goods. The opportunity cost is the value of the next best alternative that is forgone in order to produce or consume a particular good.
1. To find Paulie's opportunity cost of producing a cup of ice cream, we need to compare it to his production of t-shirts.
Paulie can produce 3 cups of ice cream or 18 t-shirts. This means that, for every 3 cups of ice cream he produces, he gives up the opportunity to produce 18 t-shirts. To find the opportunity cost of a cup of ice cream, we divide the number of t-shirts he gives up by the number of cups of ice cream he produces:
Opportunity cost of a cup of ice cream = 18 t-shirts / 3 cups of ice cream = 6 t-shirts
Therefore, Paulie's opportunity cost of producing a cup of ice cream is 6 t-shirts.
2. To find Vinny's opportunity cost of producing a t-shirt, we need to compare it to his production of ice cream.
Vinny can produce 10 cups of ice cream or 11 t-shirts. This means that, for every 11 t-shirts he produces, he gives up the opportunity to produce 10 cups of ice cream. To find the opportunity cost of a t-shirt, we divide the number of cups of ice cream he gives up by the number of t-shirts he produces:
Opportunity cost of a t-shirt = 10 cups of ice cream / 11 t-shirts ≈ 0.91 cups of ice cream
Therefore, Vinny's opportunity cost of producing a t-shirt is approximately 0.91 cups of ice cream.
3. Paulie has a comparative advantage in the good with the lower opportunity cost. From the calculations above, we can see that Paulie's opportunity cost of producing a cup of ice cream is 6 t-shirts, while Vinny's opportunity cost of producing a t-shirt is approximately 0.91 cups of ice cream.
Therefore, Paulie has a comparative advantage in t-shirts, and Vinny has a comparative advantage in ice cream.
The correct answer is option b. t-shirts; ice cream.