Answers Chapter Three

Answers Chapter Three - Answers Chapter Three: 1. 3 scoops...

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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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4. 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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Answers Chapter Three - Answers Chapter Three: 1. 3 scoops...

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