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Answers Chapter Three:
1.
3 scoops of icecream
Iggi can produce 8 waffle cones in an hour. But doing so means he is not
producing ice cream during that hour. If Iggi were to produce ice cream
during that hour, he could produce 24 scoops of ice cream. Therefore, Iggi
must give up 24 scoops of ice cream in order to produce 8 waffle cones. So,
Iggi's opportunity cost of producing waffle cones is 24 scoops of ice cream / 8
waffle cones = 3 scoops of ice cream per waffle cone.
2.
4 scoops of icecream
Kurt can produce 4 waffle cones in an hour. But doing so means he is not
producing ice cream during that hour. If Kurt were to produce ice cream
during this hour, he could produce 16 scoops of ice cream. Therefore, Kurt
must give up 16 scoops of ice cream in order to produce 4 waffle cones. So,
Kurt's opportunity cost of producing waffle cones is 16 scoops of ice cream / 4
waffle cones = 4 scoops of ice cream per waffle cone.
3.
Iggy has an absolute and comparative advantage in the production of waffle
cones
Iggi can produce 8 waffle cones in an hour and Kurt can produce 4 waffle
cones in an hour. Therefore, Iggi has an absolute advantage in the production
of waffle cones: it takes Iggi less time to produce each waffle cone.
Iggi's opportunity cost of producing one waffle cone is 3 scoops of ice cream.
Kurt's opportunity cost of producing one waffle cone is 4 scoops of ice cream.
Since Iggi has a lower opportunity cost, he has a comparative advantage in
producing waffle cones.
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Iggi has an absolute advantage in the production of ice cream, but Kurt has a
comparative advantage in the production of ice cream.
Iggi can produce 24 scoops of ice cream in an hour and Kurt can produce 16
scoops of ice cream in an hour. Therefore, Iggi has an absolute advantage in
the production of ice cream: it takes Iggi less time to produce a scoop of ice
cream.
Iggi can produce either 24 scoops of ice cream or 8 waffle cones in an hour.
Therefore, for Iggi, the cost of producing 8 waffle cones is 24 scoops of ice
cream. So Iggi's opportunity cost of producing one scoop of ice cream is 8 / 24
= 1/3 of a waffle cone. Kurt can produce either 16 scoops of ice cream or 4
waffle cones in an hour. Therefore, for Kurt, the cost of producing 4 waffle
cones is 16 scoops of ice cream; Kurt's opportunity cost of producing one scoop
of ice cream is 4 / 16 = 1/4 of a waffle cone. Since Kurt has a lower
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 Spring '08
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