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Problem Set No - Problem Set No.1 Economics 1 The...

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Problem Set No.1 Economics 1. The opportunity cost of one burger in the U.S. is .5 of a VCR meaning that for every 1 burger you make you are forgoing the production of half of a VCR. The opportunity cost of making one burger in Japan is two-thirds of a VCR meaning for every burger produced in Japan you could have made 2/3 of a VCR. 2. In the U.S. the relative price of one VCR is two burgers meaning that for every 2 burgers produced you could make one VCR. In Japan the relative price of one VCR is 1.5 burgers meaning that for every 1.5 burgers produced you could make 1 VCR. 3. See paper 4. The opportunity cost of the good in the vertical axis(Burgers) is the absolute value of the slope. So in terms of the good on the vertical axis the higher the opportunity cost the less negative the slope is and vice versa. 5. The U.S. has a comparative advantage in burger production because they can make 2 Burgers for every VCR, whereas, in Japan you can only make 2/3 of a burger for every VCR you give up.
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