Individual Project 1 - 40 Chickens = 80 Potatoes 1 Chicken...

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Economic Concepts 1 Economic Concepts Marquetta Nixon Microeconomic Professor Grace O. Onodipe Date: Sept. 1, 2011 Due Date: August 28, 2011
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Economic Concepts 2 This work defines and illustrates examples of opportunity cost. It also defines and compares comparative and absolute advantage. Then, the work extends the narrative to compare these terms in today’s society. * What is Michelle’s opportunity cost of producing potatoes? (1 / 200) x 50 = 0.25 Chickens 200 Potatoes = 50 Chickens 1 Potato = 1/200 x 50=0.25 Chickens Opportunity Costs= 0.25 Chickens * What is Michelle’s opportunity cost of producing chickens? (1 / 50) x 200 = 4 Potatoes 50 Chickens = 200 Potatoes 1 Chicken = 1/50 x 200= 4 Potatoes Opportunity Costs= 4 Potatoes * What is James’ opportunity cost of producing potatoes? (1 / 80) x 40 = 0.5 Chicken 80 Potatoes = 40 Chickens 1 Potato = 1/80 x 40= 0.5 Chickens Opportunity Cost =.5 Chickens * What is James’ opportunity cost of producing chickens? (1 / 40) x 80 = 2 Potatoes
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Unformatted text preview: 40 Chickens = 80 Potatoes 1 Chicken = 1/40 x 80 = 2 Potatoes Opportunity Costs= 2 Potatoes * Which person has an absolute advantage in which activities? * Michelle has an absolute advantage as she produces both more chickens and potatoes. * Which person has a comparative? * James has a comparative advantage to produce chickens because his opportunity costs are lower than Michelle. But Michelle has a comparative advantage to produce potatoes because she has a lower comparative advantage to James. Economic Concepts 3 * Suppose that they are thinking of each specializing completely in the area in which they have a comparative advantage, and then trading at a rate of 2.5 pounds of potatoes for 1 chicken, would they each be better off? Explain. James would specialize in Chickens. 1 Chicken = 2.5 Potato Trade 80/2.25 Potatoes = 36 Chickens Michelle would specialize in Potatoes 1 Chicken = 2.5 Potato Trade 50/2.25 Potatoes= 22.2 Chickens References...
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Individual Project 1 - 40 Chickens = 80 Potatoes 1 Chicken...

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