Please answer both questions. If answers are clear and correct I will leave posi
ID: 1172248 • Letter: P
Question
Please answer both questions. If answers are clear and correct I will leave positive feedback! Thank you!
1. Comparative advantage Aa Aa ? PPFs and opportunity costs also can illustrate comparative advantages and highlight the gains in trade created by specialization. Comparative advantages exist when a producer has a lower opportunity cost for a specific good than a competitor does Remember Fritz, the farmer from the last question? Now suppose there is another farmer, Reva, who can also produce alfalfa or beef. The table below shows the amount of alfalfa and beef each farmer can produce in a day. Both farmers work six days per week and spend their time producing alfalfa, beef, or some combination of the two. Alfalfa 15 pounds per day 10 pounds per day Beef 6 pounds per day 8 pounds per day Fritz Reva Reva's opportunity cost of producing one pound of beef is 10 pound (s) of alfalfa. 10 We found before that his opportunity cost of producing bee 2.5 ounds of alfalfa. Comparing this to Reva's opportunity cost of producing beef, we can see that Fritz 1.9a comparative advantage in the production of beef 1.25 Note that when one person or country has a comparative advantage in producing one good, the other person or country must have a comparative advantage in producing the other good. (Check this for yourself, and see that the other farmer has a comparative advantage in producing alfalfa.)Explanation / Answer
Time required for Reva for producing 1 pound of Alfalfa = 1/10th of a day Time required for Reva for producing 1 pound of Beef = 1/8th of a day Opporunity cost of producing 1 pound of Beef = Number of pounds of Alfafa that can be produced within 1/8th of a day = (1/8)/(1/10) = 1.25