Aiu Econ 220 Unit 1 Ip

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Unit 1 IP
Name: Jourdain Yardan
Date: February 13, 2012
1.What is Michelle’s opportunity cost of producing potatoes? Michelle’s opportunity cost of producing potatoes is 4 pounds per chicken that could be raised.

2.What is Michelle’s opportunity cost of producing chickens? If Michelle focuses more on chickens, she can raise one chicken equal to 4 pounds of potatoes.

3.What is James’ opportunity cost of producing potatoes? James’ opportunity cost for producing potatoes is 2 potatoes to 1 chicken.

4.What is James’ opportunity cost of producing chickens? James’ opportunity cost for producing 1 chicken is one potato.

5.Which person has an absolute advantage in potatoes? Michelle has an absolute advantage over James because she can raise more chickens and grow more potatoes than James all year round.

6.Which person has an absolute advantage in chicken? Michelle has the absolute advantage over James due to the fact she can raise more chickens and/or grow more potatoes than James year round.

7.Which person has comparative advantage in potatoes? Michelle has the comparative advantage in potatoes due to the fact that the opportunity cost for her to grow her potatoes is less than James who has to raise 1 chicken to cultivate 2 potatoes. Michelle will need to raise 1 chicken for it to be equivalent to 4 pounds of potatoes.

8.Which person has comparative advantage in chicken? James has an absolute advantage in chicken due to the fact he has less assets to lose than Michelle to raise chicken. James has a lower opportunity cost to produce potatoes than Michelle. James only needs to cultivate 2 potatoes to raise 1 chicken whereas Michelle has to cultivate 4.

9.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. I believe they will both be better off due...
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