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
c.
d.
Do not go by the above answer. All you need to know is : what is given up (18 shirts) divided by what is gained 3 icecreams for the first one. The second is the same principle given up/gained.
.16
1.22
b
32,25,c
a) 0.6 rest of them is correct from taylor
9.9
To determine the opportunity cost and comparative advantage, we need to calculate the opportunity cost for each producer.
Opportunity cost is the value of the next best alternative that is forgone when making a decision. In this case, we're looking at the opportunity cost of producing a cup of ice cream for Paulie and the opportunity cost of producing a t-shirt for Vinny.
To calculate the opportunity cost, we divide the quantity of the alternative good that could have been produced by the quantity of the good being produced.
1. Paulie's opportunity cost of producing a cup of ice cream:
The quantity of t-shirts Paulie could have produced instead of an ice cream cup = 18 t-shirts.
The quantity of ice cream cups produced = 3.
The opportunity cost = 18 t-shirts / 3 ice cream cups = 6 t-shirts per ice cream cup.
2. Vinny's opportunity cost of producing a t-shirt:
The quantity of ice cream cups Vinny could have produced instead of a t-shirt = 10 ice cream cups.
The quantity of t-shirts produced = 11.
The opportunity cost = 10 ice cream cups / 11 t-shirts = 0.91 ice cream cups per t-shirt.
So, to answer the questions:
1. Paulie's opportunity cost of producing a cup of ice cream is 6 t-shirts per ice cream cup.
2. Vinny's opportunity cost of producing a t-shirt is 0.91 ice cream cups per t-shirt.
Based on these calculations, we can say that:
3. Paulie has a comparative advantage in t-shirts, and Vinny has a comparative advantage in ice cream cups. Hence, the correct answer is (b) t-shirts; ice cream.